The government has asked Reliance Industries Ltd (RIL) to sign agreements to increase supply of natural gas from KG-D6 fields to urea manufacturing units of Iffco and Indo Gulf Fertilizer Ltd.
Indian Farmers Fertilizer Cooperative Ltd (IFFCO) was in 2007 allocated 0.52 million standard cubic meters per day of KG-D6 gas for its Phulpur urea plant but Gas Sales and Purchase Agreement (GSPA) was signed only for 0.25 mmscmd.
Similarly, Indo Gulf Fertilizer Ltd's Jagdishpur unit was allocated 0.478 mmscmd but gas sale agreement was signed only for 0.25 mmscmd.
An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukhejree had on February 24 decided that RIL should supply full allocation of gas to the fertilizer units, sources privy to the development said.
Nearly four months after the decision, the Oil Ministry on June 18 wrote to RIL asking it to sign GSPAs for the remaining quantities - 0.27 mmscmd for Phulpur unit of IFFCO and 0.228 mmscmd for Jagdispur plant of IGFL, sources said.
RIL's KG-D6 fields have seen a sharper than expected decline in gas production, with output almost halving to about 31.5 mmscmd in past two years.
The government has accorded urea manufacturing plants top priority in allocation of KG-D6 gas, followed by LPG extraction unit of GAIL India, power plants and city gas distribution (CGD) companies in that order.
As KG-D6 output dipped, the government ordered that full commitment of fertilizer units be met first and a pro-rata cut be applied on rest of the consumers.
Sources said increased supplies to fertilizer units, who have in all been allocated 15.35 mmscmd of KG-D6 gas, would mean a further cut in supplies to power plants. Power plants, who had originally been allocated 28.90 mmscmd, are currently getting about half of their entitlement.
After the February 24 EGoM, the Oil Ministry ordered RIL to sign GSPAs with NTPC, Delhi's Bawana power project and 10 CGD firms but it took nearly four months for it to issue orders for signing of agreements for fertilizer plants.
RIL was asked to sign supply agreements for 2.16 mmscmd to NTPC, 0.836 mmscmd to Bawana and smaller quantities to city gas projects in Hyderabad, Kakinada, Delhi, Indore, Ujjain, Agra, Kota, Meerut, Dewas and Sonipat, sources said.
