Facts on NTPC clause-20090616-092341

  • Facts on NTPC clause-20090616-092341 
  • Tadamichi has transcribed this tape in a comment below. Please crosscheck.

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    1 Response to “Facts on NTPC clause-20090616-092341”


    1. 1 Tadamichi Kuribayashi November 30, 2010 at 3:14 pm

      Niira Radia: Manoj.. Manoj, just explain the MOU, you are on speaker phone, just explain the MOU. See, MOU had no price on it, right?

      Manoj: Yes

      Niira: NTPC’s price was determined by NTPC or NTPC umm, explain the sequence of events.

      Manoj: The MOU says that the price of gas for the 28 mmscmd, the terms of supply of gas of 28 mmscmd should be no less favourable than NTPC terms.

      Niira: OK

      Manoj: Yeah

      Niira: Who determines the NTPC price?

      Manoj: The NTPC price was a global bid that was called for by NTPC, and we had propsed a price of 2.34

      Niira: We had proposed the price of 2.34?

      Manoj: Yes. Post which there was a LOI that was issued to us, confirming that, you know, they would like to appoint us as the supplier of gas. When the LOI went into a formal agreement, the draft of the agreement had a clause which said that we are liable for unlimited liabilities in case of non supply of gas.

      Niira: Mmm hmm

      Manoj: Therefore, we said that we will not supply.. we will not sign such an agreement because we can’t be open to paying unlimited liabilities, you should have a cap on the liability.

      Niira: Right, so the price of…

      Manoj: Then NTPC drags us to court saying that we are not honouring an agreement, we said we have not signed an agreement. They said that an LOI is as good as an agreement, therefore you are liable to supply the gas at 2.34

      Niira: Umm hmm

      Manoj: That is what is being fought in the courts today. However, our claim has been in the draft agreement which was sent by NTPC to us, there was a clause which said that subject to government approval, which is what we replicated in the RN&RIL GSDA also.

      Niira: That also said subject to government approval, right?

      Manoj: Yeah, because the same agreement was replicated for RN & RIL.

      Niira: And the high court chief justice has ignored that, is it?

      Manoj: No. He has said that there is no clause in the production sharing contract with the government, which restricts us from selling gas at a lower price than what the govenment approved price is.

      Niira: Is that true?

      Manoj: That is what the judge’s understanding of the case is. See, the judge is relying on the fact that when he asked Harish Salve – “Do you make profits at 2.34?”, Harish Salve said – “I do make profits at 2.34”

      Niira: Hmm

      Manoj: See the point is, at any price of the gas I make profit because these production sharing contract says that I first.. I will have to recover all my investments – till then only 10% of the revenues go to the government. Till I recover 2 and a half times my investments, 28% goes to the government. Post that, 85% goes to the government. So at any price, I will still make profit over a period of time.

      Niira: Mmm hmm

      Manoj: Now the judge obviously has not understood this and has gone by these status submission of Harish Salve saying that I made profit at 2.34. Even at 1 cent, I may make profit.

      Niira: Mmm hmm. Right. But tell me one thing Manoj, given that the NTPC outcome is still pending and given there is subject of government approval, what is the position as far as NTPC is concerned?

      Manoj: NTPC is still in court. The case that is being fought is for unlimitied and limited liabilities. And we have now.. and we actually want to now.. you know we have taken a position which says that.. you know everythig is subject to government approval, so therefore you know NTPC also the price has to be 4.2 since it’s subject to government approval.. so that is there we are…

      Niira: No, the PSE which you’re saying in the case does it say where he says that it does not say that you have to take government approval, does it say so?

      Manoj: The PSE actually has got 3 clauses – 21.6.1, 21.6.2, 21.6.3. What was argued time and again is that our version is that all 3 require government approval. Their version is that we are allowed to.. we have allowed the freedom of marketing gas and therefore what the government said is – that will be valued at 4.2, we are free to sell the gas at whatever the price is that we agree to with our customers. That is their position. Our position is that there is no difference between value and price.. valuation and price. All sale of gas has to be at 4.2

      Niira: Right. Did you manage to speak to Raja after that last night?

      Manoj: No no. I mean I briefly spoke to him to conform whether I can issue that statement or whether I need to take any further approval, he said no no you issue the statement, done.

      Niira: The MOU that had, between Mukesh and Anil, did that have subject to government approval?

      Manoj: It had.. on NTPC terms. It did not say MOU [inaudible]

      Niira: And it didn’t say 2.34 either?

      Manoj: No, it didn’t say 2.34

      Niira: Is RIL and NTPC fighting on price?

      Manoj: No, they are facing on unlimited and limited liability.

      Niira: Then RIL has accepted 2.34, right?

      Manoj: That is RIL’s price only. It was a price which RIL submitted in the global bid.

      Niira: Aaan haan. Have they officially retracted that price, Manoj?

      Manoj: No they have not officially retracted, I don’t think they have officially retracted that price.

      [Tape is till here only. It seems like middle of conversation]


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