Power woes make state pay through nose for ONGC gas

MUMBAI: State-owned ONGC has agreed to sell gas at $11 per mmBtu to Mahagenco, Maharashtra government���s power generating arm. The price is two-and-a-half times of the government-approved price of $4.32 per mmBtu at which Reliance Industries (RIL) will sell gas from its KG basin fields to fertilisers and power firms. Private sector producers like Panna Mukta Tapti (PMT) JV, which is jointly owned by RIL, British Gas and ONGC, sells gas below $6 per mmBtu. Also, Cairn-Videocon consortium sells gas from its Ravva filed at of $5 per mmBtu.

ONGC confirmed the development to ET. The PSU will sell 1 mmscmd gas to Mahagenco. Replying to a query from ET, ONGC stated that gas supply to Mahagenco has been effected from September 1, 2008, to ���tide over the power situation in Maharashtra.��� Under the agreement, ONGC will supply the gas, through Gail���s pipeline to Mahagenco, subject to ministry approval. Interestingly, Gail supplies 2 mmscmd of gas to Mahagenco at $2.2 mmBtu. Gail buys it from ONGC.

The development assumes significance as it is expected to act as a benchmark for gas sale, industry sources said. Post the ONGC-Mahagenco deal, RIL may seek to revise its gas supply price of $4.32 per mmBtu, they added. RIL is also planning to approach the government to revise gas price after a spurt in crude prices. The price of $4.32 was arrived at by linking it to the crude price at $60 a barrel, which is now around $110.

Sources said that ONGC had initially sought to sell gas at $16 per mmBtu but scaled it down by $5 after the intervention of Maharashtra chief minister Vilasrao Deshmukh and petroleum minister Murli Deora.

MahaGenco���s gas-starved Uran plant is running under half its installed capacity of 850 mega watts. Mahagenco desperately needs supplies for its under-utilised plants, especially with the start of the festive season.

Industry sources said Mahagenco has no alternative but to procure gas from PSUs. ���ONGC seems to be taking advantage of the situation,��� they added. Mahagenco had earlier said it would be impossible to sustain operations if it buys gas at $11.

Mahagenco called upon ONGC to reduce price to RIL���s rate and also offered to provide a bank guarantee of Rs 100 crore.