Steel sector to get priority in gas allocation from KG basin

The steel industry will be accorded priority in allocation of natural gas from Reliance Industries Krishna Godavari basin once the initial fuel production exceeds 40 mmscmd, official sources said.      

The decision for the same has been taken by the Empowered Group of Ministers (EGoM) on pricing and commercial utilisation of gas under the New Exploration Licensing Policy, they added.      

"The EGoM has decided to give priority in supply of natural gas to steel sector from KG D-6 basin production beyond the initial 40 mmscmd," a senior official said quoting the EGoM decision.      

In view of it, the Ministry of Petroleum and Natural Gas has asked the Steel Ministry to furnish details regarding the quantity of gas required by steel companies as also their present source of allocation.      

The steel companies that use natural gas as fuel for manufacturing iron and steel are, Essar Steel, Ispat Industries and Vikram Ispat. The trio produces over eight million tonnes of steel annually through gas-based sponge iron technology.      

Of the total earmarked quantity of 5.76 mmscmd, the three companies are understood to be getting 23.42% of their gas requirement from GAIL.      

The Ruias-led Essar Steel alone needs six mmscmd of gas, for which it has separate arrangements with GAIL and other public-sector oil companies.However, against an agreement for 3.1 mmscmd from GAIL, Essar Steel is currently believed to be receiving only 20% (0.66 mmscmd) of the earmarked quantity.      

Ispat Industries too is getting only 40% of its earmarked gas quantity. Similar is the case with Vikram Ispat.      

Faced with a shortage of natural gas, the companies had either slashed their output or were using another mode of production.