Govt to stop gas supply to Deepak Fertilizer

Fertiliser Ministry last week wrote to the Oil Ministry seeking immediate stoppage of 0.5 million standard cubic meters per day of gas from RIL

The government will stop supply of KG-D6 gas to phosphatic and potassic (P&K) fertiliser plants of firms like Deepak Fertilizer Ltd and restrict supply of cheaper domestic gas to urea manufacturing units only.

The Fertiliser Ministry last week wrote to the Oil Ministry seeking immediate stoppage of 0.5 million standard cubic meters per day of gas from Reliance Industries' eastern offshore KG-D6 field being sold to P&K fertiliser plants.

"We received a two-page letter from them (Fertiliser Ministry) on Friday. We will act on it," a senior Oil Ministry official said.

An Empowered Group of Ministers (EGoM) headed by the then Finance Minister Pranab Mukherjee had in early 2012 put on hold the proposal to suspend supply of KG-D6 gas to P&K plants of Deepak Fertilizers, Gujarat State Fertilizer Corp and Rashtriya Chemicals and Fertilizer till May 25, 2012.

The Department of Fertiliser was asked to calculate the gains made by companies using KG-D6 gas in manufacture of fertilisers other than urea. The gain made in manufacture of P&K fertiliser using cheaper gas, was to be recovered from these units.

However, the Department of Fertiliser did not formulate the guidelines for the same and natural gas supplies to P&K plants continued for almost two years beyond the stipulation laid by EGoM.

The official said now the Department of Fertiliser has written to the Petroleum Ministry seeking stoppage of gas to P&K units.

In view of limited supply of domestic gas, the Ministry of Petroleum & Natural Gas (MoPNG) had in December 2011 proposed to stop domestic supplies to the phosphorus and potash (P&K) fertiliser units.

It had proposed to EGoM that "The allocation to Deepak Fertilizer may be cancelled and MoPNG be authorised to cancel any other KG-D6 allocations for P&K plants or any allocation in which KG-D6 gas is being used for P&K fertiliser. Further, KG-D6 gas allocations in the future, be made only to urea fertiliser plants."

However, the EGoM modified this to say that, "The supply of KG-D6 gas to P&K plants (Deepak, GSFC and RCF) may be suspended till guidelines as proposed by DoF as issued. Further, KG-D6 gas allocations in the future should only be made to urea fertiliser plants."

Later, the EGoM kept this decision in abeyance till May 25, 2012, the official said.

Fertiliser plants that face supply cut will have to substitute domestic gas with costlier imported liquefied natural gas (LNG).

The official said that total domestic gas supply to urea making fertiliser plants will continue to be maintained at 31.5 mmscmd as had been decided by EGoM in 2013. This included 0.5 mmscmd gas being consumed by P&K plants.