SC refuses relief to Essar, Welspun

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: May 10 2012, 09:19am hrs
In a setback to steel companies, the Supreme Court on Wednesday refused to stay the ministry of petroleum and natural gas directive to Mukesh Ambani-led Reliance Industries (RIL) to cut gas supplies from its KG-D6 fields to sponge iron producers.

A bench headed by Justice Altamas Kabir refused to grant any interim relief to producers of sponge iron whose raw material is natural gas. The producers are fearing closure of their operations because of the alleged irrational move by the government, which said that they can resort to imports. The court also adjourned the matter to August 1.

Major sponge iron producers including Essar Steel, Welspun Maxsteel and JSW Ispat Steel (formerly Ispat Industries) had challenged the oil ministrys directive of May last year asking RIL to reduce natural gas supplies to non-core users such as steel plants and direct the entire 50 mscmd of gas produced from the KG basin to priority sectors such as power, fertilisers, LPG and CNG. The directive was issued after a sharp drop in output at RIL Industries' KG-D6 fields.

Essar Steel, which had signed up for 3.2 mscmd, had got its petition transferred from the Delhi High Court to the apex court.

Senior counsel Abhishek Singhvi and Ranjit Kumar, on behalf of the manufacturers, argued that they don't want equality with other core sectors but requested for minimum amount of gas for their survival. They said that the same can be done by reducing the supply of gas to power sector.

However, Attorney general GE Vahanvat argued that the core policy of the government cannot be subjected to change unless it is so arbitrary. "The concept of core policy has existed for decades and the companies had never challenged it," he said, while vehemently denying a pie to the companies.

According to them, the 2008 guidelines of EGoM issued under the chairmanship of Pranab Mukerjee are clear that the priority to be afforded to 'core' sectors is only from the first 40 mmscmd of natural gas produced from the KG D6 fields and any output beyond this was to be utilised 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 rational 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.

Challenging the Bombay High Court judgment that dismissed the companies' plea against the government's move, Welspun, which was being supplied 0.40 mscmd, and Ispat in their petition said that the impugned directive of the government was arbitrary and unconstitutional.