Gas pooling: SC to consider Essar’s plea in December

By: | Published: October 6, 2015 12:02 AM

The Supreme Court on Monday said that it will take up in December Essar Steel India’s plea seeking a direction to the government to introduce 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.

The Supreme Court on Monday said that it will take up in December Essar Steel India’s plea seeking a direction to the government to introduce 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.

The company wants that the policy should take within its ambit gas supply from all sources like domestic, long term, short term and spot  re-gasified liquefied natural gas (RLNG), and thereby, create a enlarged pool of gas supply.
A bench headed by Justice Ranjan Gogoi tagged the Essar’s fresh application with other similar petitions pending before the apex court. All the petitions will come up for hearing in December.

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 Industries’ KG-D6 fields.

The apex court had in September last year granted time to the government to take a fresh look into the matter of allocation and distribution of natural gas keeping in mind the priorities as existing and the availability of the natural resource as on date and also in the future.

During the pendency of the appeals, the government on March 25, this year,  introduced a gas pooling policy, titled as “Approval to innovative mechanism for utilisation of stranded gas- based generation capacity” to ensure adequate supply of gas to stranded gas-based power plants with a view to kick-start their operations as the same were either not functioning or were  functioning at marginal Plant Load Factor.

Essar senior counsel P Chidambaram told the court that the Centre should be asked to have a similar policy for the steel sector like the recently introduced  policy for the power and the fertiliser sectors.  “No policy has been introduced, which extends to the steel sector, and thereby, gas-based steel plants, such as the petitioner’s, are continuing to be caused grave prejudice. Applicability of the gas supply and pooling policy to the steel sector will aid in unlocking the stranded value in gas-based steel plants, which have been set up on the assurance of an affirmed gas supply, and had, in fact, been granted prior firm allocation by the Gas Linkage Committee,” the application stated.

According to Essar, it had prior firm allocations and on that basis it had made large- scale investments but still it is being denied gas, while entities with no assurance or prior allocation are being supplied gas. “Such a practice is arbitrary and discriminatory,” the application said.

It claimed that it is facing extreme financial and commercial duress due to 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.

Accusing the government of acting in an arbitrary manner by introducing pooling policies for stranded plants on different considerations without any basis, Essar said that even amongst the stranded plants, who as such are equals, the government is giving unequal treatment to them. “This is apparent for different policies for power and fertilizer sector plants, and no policy at all for the gas-based steel sector,” said Essar, which requires 5.50 mmscmd natural gas as feedstock for the steel manufacturing process.

“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, fertilizer and steel sector of 170 mmscmd, it said.

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