Apex court notice to petroleum ministry on gas pooling policy

By: | Updated: December 5, 2015 12:38 AM

The Supreme Court on Friday asked the government to clarify its position on introducing a universal gas pooling policy to ensure adequate gas supply...

The Supreme Court on Friday asked the government to clarify its position on introducing a universal gas pooling policy to ensure adequate gas supply to stranded gas-based plants in the steel, power and fertiliser sectors in the country, a direction sought by Essar Steel India Ltd.

Essar Steel had moved the apex court seeking parity with the fertiliser and power sectors, as the present policy does not take within its ambit gas supply from all sources like domestic, long-term, short-term and spot RLNG, and thereby creates an enlarged pool of gas supply. “The availability of gas from such a pooling mechanism will be 160 mmscmd, which will be sufficient to meet the most of the  gas requirement of the existing gas based facilities from all sectors including power, fertiliser and steel sector of 170 mmscmd,” it said. A bench headed by justice Ranjan Gogoi, while seeking a response from the Centre, posted the matter for further hearing on January 20.

Essar senior counsel P Chidambaram, appearing for Essar, told the bench that the Centre is “obliged to frame a similar policy for the steel sector like the recently introduced policy for the power and the fertiliser sectors.” The government on March 25 this year introduced a gas pooling policy, ‘Approval to innovative mechanism for utilisation of stranded gas based generation capacity’, to ensure an adequate supply of gas to stranded gas-based power plants.

Accusing the government of acting in an arbitrary manner, Essar claimed that it is facing extreme financial and commercial duress due to the non-availability of gas for its 10 MMTPA gas based sponge iron/steel plant, set up in Hazira at an investment of more than Rs 37,500 crore since March 30, 2011, the day the government curtailed gas supply to the steel sector.

Essar requires 5.50 mmscmd natural gas as feedstock for the steel manufacturing process.

However, additional solicitor-general Maninder Singh opposed Essar’s plea saying the gas production has come down to 12 mmscmd. He further said that the government has objections to the maintainability of the Essar’s plea and it should be allowed to raise it in its response.

Senior counsel Shyam Divan, appearing for RIL, said that it will go by what the government says.

On this, justice Gogoi observed in a lighter vain that RIL is already fighting with the government over a pricing issue in an arbitration matter. “Heavy warfare is going on. You have a dispute with the government over the pricing,” he said. But Divan added that “we (RIL and govt) are working well”.

Major sponge iron producers Welspun Maxsteel, JSW Ispat Steel (formerly Ispat Industries) and Essar Steel had in 2012 challenged the oil ministry’s directive of May 2011 asking Mukesh Ambani-led Reliance Industries (RIL) to cut gas supplies from its KG-D6 fields 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’s KG-D6 fields.

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