Adversities bring rivals together. Companies which make steel through the sponge iron route have closed ranks to fight a legal battle with the government for pursuing a gas allocation policy that they say clash with the directives of an empowered group of ministers (EGoM).

Essar Steel has moved the Supreme Court against the government for asking Reliance Industries not to change the policy of restricting gas allocation from its KG D6 fields to priority sectors like fertilisers and power, even after production crosses 40 mmscmd. The Ruias-controlled firm has requested that its petition be clubbed with that of Welspun Maxsteel and JSW Ispat Steel (formerly Ispat Industries) ? two steelmakers which earlier jointly moved the apex court on the matter.

Welspun and JSW Ispat Steel had challenged the petroleum ministry?s May directive asking RIL to reduce natural gas supplies to non-core users such as steel plants and direct the entire 50 mmscmd output from the KG basin to priority sectors.

The directive was issued after a sharp drop in output at KG D6 fields from 61.5 mmscmd last March to under 50 mmscmd now.

Seeking transfer of its plea from the Delhi High Court to the Supreme Court, Essar Steel, which had signed up for 3.2 mmscmd, said since the issue involved in both cases is the same, in order to avoid multiplicity of proceedings and conflicting judgments, this transfer petition should be heard along with Welspun?s petition. The matter will be heard on January 16.

Challenging the Bombay High Court judgment that dismissed the companies? plea against the move, Welspun and JSW Ispat ? which were getting 0.40 mmscmd and 0.59 mmscmd, respectively ? in their petition had said that the directive was ?arbitrary and unconstitutional?.

Petitioners say the 2008 norms set by the Pranab Mukherjee-led EGoM are clear that the priority accorded to ?core? sectors is only for the first 40 mmscmd of gas from the KG D6 fields and any further output was to be used for fulfilling the allocation to gas-based sponge iron plants.

?In the face of the clear mandate in the guidelines of the EGoM to restrict allocation priority till the first 40 mmscmd, there is absolutely no rationale or public interest, much less an overriding public interest, being served by directing that priority in supply of natural gas be given to ‘core’ sectors beyond the first 40 mmscmd and to the extent of their entire firm allocation,? the companies stated.

Welspun counsel Mahesh Agarwal said KG output fell due to the negligence on the part of the ministry in ensuring that the output remained at the projected level of around 80 mmscmd. ?Respondent No. 1 (ministry) has, instead, showing utmost lack of accountability, completely wiped out the share of the petitioners in the supply of natural gas from the basin without providing any alternate remedy whatsoever,? the petition filed by Welspun stated.

Fearing closure of their operations if supply is cut, Welspun and Ispat contended that the irrational move has reduced production of sponge iron, leading to loss of revenue for the exchequer.

Last month, a bench headed by justice Dalveer Bhandari had sought response from RIL, Cayman Islands-based Niko (Neco), NTPC, GMR Energy, Hyderabad-based Konaseema Gas, Lanco Kondapalli Power, Ratnagiri Gas & Power and others on a similar petition jointly filed by Welspun and JSW Ispat Steel.