Dadri Power Project in Trouble

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) December 28, 2006 --

The dream project of Anil Dhirubhai Ambani Group to set up the world�s largest gas based single source 3,500 MW power plant remains exactly that � a dream. There is no movement on the project for a variety of reasons. At best, it remains a real estate deal between the UP Government and ADAG, the worst form of crony capitalism. UP Government has done another favour to ADAG by allotting prime land in Noida for setting up special economic zone. With elections to UP Assembly expected in next 6 months, the controversy surrounding the power project is gaining momentum UPCC president Salman Khursheed has demanded scrapping of the deal. To prevent fallout after the elections, as Samajwadi Party is expected to suffer losses, ADAG is opting for frivolous litigation and wriggle out of its commitments. He has been blaming everybody from Reliance Industries to the petroleum ministry to come out unscathed.



The truth is that ADAG has no interest in the project, beyond making a killing in real estate. So far no capital goods and equipment for setting up a 3,500 MW plant has been ordered. Gas supplies have not been tied up. The Government has rejected the closed door deal between RIL and Reliance Natural Resources Ltd (RNRL) for supply of natural on grounds of lack of transparency.

The Government rejected the proposal of RIL to sell gas to Anil Ambani controlled RNRL from D-6 block in KG Basin at a price far below the market price. As a party to the contract, the Government was concerned with the formula or basis on which the gas under the production sharing contract was to be valued for the purpose of computing cost recovery linked to the valuation of cost petroleum, the profit share of the parties, including the government and the royalty.



The Government turned down the RIL�s proposed valuation formula for gas sales to RNRL on the ground that it has been derived on the basis of competitive arms length sales in the region for similar sales under similar conditions. �The transaction between RIL and RNRL is part of their de-merger agreement and therefore does not meet the production sharing contract criteria of arms length sales,� it asserted.

As per the de-merger proposal, RIL was to sell gas at $2.34 per million BTU. The prevailing domestic gas price from fields operated by joint venture/private companies commands a significantly higher price than the proposal of RIL.



The Government is of the view that, ideally, any price discovery should be the result of an open and transparent competitive bidding process that allows fair and equal opportunity to all gas consumers to participate in the price discovery. The same procedure has already been followed by companies, including RIL, in the Pann-Mukta and Tapti production sharing contracts.