Gas allocation: Fertiliser might retain priority tag

EGoM to meet on July 22 to take decision on the issue

The Centre will not divert the natural gas allocated to the fertiliser sector from the Reliance Industries Ltd (RIL)-operated KG-D6 block. Also, the priority status for fertliser plants may remain intact. The Defence Minister A K Antony-headed empowered group of ministers (EGoM) will meet on July 22 to take a decision on the issue.

Earlier, it was expected the EGoM would look into a plan to shelve priority status for natural gas allocation to urea facilities and re-allocate the gas to the power sector.

“Today, we have decided to protect the requirements of the fertiliser and agriculture sectors. At the same time, we are looking at the possibilities on whether gas could be allocated to the power sector, too. There are other methodologies we can work out to ensure gas is made available for power and we are coming up with a similar strategy on the Monday EGoM,” Petroleum Minister M Veerappa Moily said after a meeting on Wednesday.

Currently, RIL supplies 14.4 million standard cubic feet a day (mscmd) to the fertiliser sector. It has stopped supplying gas to the 25 power plants to which it was scheduled to supply about 29 mscmd of natural gas. Earlier, priority status was accorded to existing gas-based urea plants, liquefied petroleum gas (LPG) units, idle power plants and city gas distribution projects.

If the EGoM decides to divert gas from the fertiliser sector, it would have cut the supply to around 9.4 mscmd; this would mean an additional subsidy burden of about Rs 6,000 crore a year for the fertiliser industry. Petroleum Secretary Vivek Rae on Wednesday told the media gas production from RIL currently stood at 14 mscmd.

Three proposals being considered by the ministry were maintaining status quo on gas allocation, dividing the gas produced equally between the fertiliser and power sectors and distributing gas among priority sectors---first the fertiliser sector, then LPG and power and finally, city gas.