Fertiliser sector to get priority upto 31.5 mmscmd till 2015-16

Additional production under NELP to be given on priority to power

The empowered group of ministers has decided to keep Fertiliser sector as the first priority for the allocation of natural gas albeit up to 31.5 million standard cubic meters per day of natural gas while deciding to supply any additional production of gas under NELP to the power sector on priority basis.
 
According to officials close to the development, the minutes of EGoM on priority allocation has discussed possibility of hike in natural gas from gas fields under New exploration licensing policy (NELP).

They added that this 31.5 mmscmd requirement of natural gas for the Fertiliser sector will met through priority allocation for the years 2013-14, 2014-15, 2015-16.

If there is deficit of gas production , it will be met through the additional gas production under NELP though new findings of state run oil companies. Therefore the gas demand of the Fertiliser sector will be met through two mechanisms NELP and administered price mechanism.

Price of natural gas under both the regime is expected to double to $8.4 per million metric British thermal units (mmBtu), effective 1 April next year 2014 , from the current domestic prices that range between $3.5 and $5.73 per mmBtu.
 
Officials said, this time though priority is given to Fertiliser sector , but the amount is limited to 31.5 mmscmd, the amount arrived in 2012-13. The next priority will be power sector. Of the 18,000-mw gas-based power capacity hit by shortage of domestic natural gas, 8,000 mw is facing the risk of being stranded.

The power ministry had strongly opposed rise in prices of natural gas following the recommendations of the Rangarajan panel. As per the panel recommendations, the pricing of gas sector should be freed and administered pricing mechanism which requires the gas producers to get the price approved by the government to be scrapped. It has further argued that around Rs 36,000 crore investments in the sector could become non-performing assets if gas is not granted to the power plants.
 
City gas and LPG will continue to get their priority allocation under APM. Thus any production of natural gas over and above 31.5 mmscmd will be given to the power sector.

Currently, the power and Fertiliser sector in India require 135 million standard cu. m per day (mscmd) and 62 mscmd, respectively. This is expected to reach 171 mscmd and 113 mscmd, respectively, in 2014-15, according to the petroleum ministry.
 
The EGoM meeting was convened after the power sector called for doing away with the priority ranking, according to which natural gas is first given to urea manufacturing fertiliser plants, then to LPG units, followed by power plants, city gas, steel and refineries.

The EGoM was presented with three options – maintaining status quo, giving equal priority to all core sectors of fertilisers, LPG, power and city gas distribution or according fertiliser and power equal priority.