The petroleum ministry has on Thursday passed a fresh order asking Reliance Industries to fully meet the contracted gas supplies to priority consumers in sectors like fertiliser, LPG, power and city gas distribution in spite of the fall in gas production from the D6 field in the Krishna Godavari basin. Considering the shortfall in output, the ministry allowed RIL to make pro-rata cuts in gas supply only in the case of remaining sectors like steel and petrochemical producers and refineries.
The decision is in compliance with the recent Bombay High Court directive to the ministry that non-priority consumers should be heard before stopping their gas allocation in favor of priority customers. The ministry has also taken the view that it need not go to the group of ministers to ensure full gas supply to priority customers.
The ministry has said that after hearing the views of non-priority consumers such as Essar Steel, GVK Industries, Ispat Industries, Welspun Maxsteel and NTPC on May 11, it has decided that the contractor has to fully meet the gas requirement of priority consumers considering the larger public interest. The government has prioritised the list of consumers such as fertiliser and power considering their importance to the national economy. Besides, if gas supply declines to the fertiliser sector, it will have serious implications on the cost of production of these companies and will lead to higher fertiliser subsidy outgo. The government has already earmarked R53,590 crore fertiliser subsidy for this fiscal.
Thursday’s order is in conformity to the government’s March 30 order asking RIL to fully honour the gas allocation to priority customers before meeting others’ requirement. The Bombay high court had asked the ministry to take a fresh view after listening to Ispat Industries Ltd, Welspun Maxsteel and Essar Steel, who went to court to restore their full contracted gas supply.
Essar said it will have to forgo R1,000 crore revenue a year if they cut down production on account of non-availability of gas. The others said they will have to forgo revenue in the range of R200-300 crore a year if gas is not made available.
RIL is now producing only about 50 mscmd (million standard cubic metres a day) of gas from the D6 field in the Krishna Godavari basin, about 15% lower than what it produced in the middle of 2010. This is just enough to meet the needs of the priority sector, and accounts for four-fifth of the original firm allocation of 63.3 mscmd to all sectors from the D6 fields.
