Essar Steel moves HC against govt order on sale of gas by RIL

Essar Steel has moved the Delhi High Court against the government's recent order asking Reliance Industries (RIL) to give top priority to fertiliser and power plants while supplying natural gas from KG basin fields.

The matter is likely to be heard tomorrow.

The company has challenged two letters written by the Ministry of Petroleum and Natural Gas (MoPNG) to RIL and its partner Niko Resources of Canada to give core sectors priority while selling natural gas from its KG-D6 fields.

Essar Steel has submitted that the directions are "illegal and arbitrary" and they were sent to RIL without any approval of the Empowered Group of Ministers (EGoM), which had originally allocated the gas among various players including the steel sector.

"These instructions of MoPNG are not backed by any authority or any enabling decision taken by the EGoM and therefore the same are unilateral in the nature, that too, in deviation of the earlier decision/guidelines by EGoM and, therefore bad in law," said Essar Steel in its petition.

It said that as a result of the order the company may lose 3.2 million standard cubic metres per day (mmscmd) of gas allocation from KG-D6, as RIL was producing just enough to meet contracted demand of the priority sectors only.

Essar Steel has submitted that in October 2008, EGoM had decided to give priority to gas-based sponge iron and steel plants along with fertiliser, LPG, power and City Gas Distribution CGD sectors.

However, CGD sector was unable to consume the entire allocated quantity of 5 mmscmd, hence there was a surplus of 3.75 mmscmd, which was alloted to steel sector. Essar had got 2.86 mmscmd.

The Ruia group firm said that all important decisions, including prioritising sectors, have been taken by EGoM.

"MoPNG, however has issued the impugned letters to RIL and Niko to supply gas to fertiliser, LPG, power and CGD apart from gas needed for operations of East West Pipeline (EWPL) to meet the entirely the demand of the said sector up to the firm allocation," said the Essar.

Requesting to set aside the letters, Essar said, "instructions of MoPNG to RIL and Niko in the impugned letter dated March 31, 2011 and May 4, 2011 are illegal, arbitrary and discriminatory".