Meet gas demand of fertiliser, power cos first: govt to RIL

Faced with falling production from KG-D6 fields, the government has asked Reliance Industries (RIL) to first supply natural gas to priority sectors such as fertiliser and power even by stopping flow to refineries and steel plants.

The order by the Petroleum Ministry follows sharp dip in production from Reliance's eastern offshore KG-D6 fields to 47.5 million standard cubic metres per day (mmscmd) in the week ended March 26, from 61.5 mmscmd output achieved a year ago.

"RIL has imposed a pro-rata cut in supplies to all its customers, including fertiliser and power firms, in view of falling output. We have now instructed them to supply gas to priority sectors in full and if there is any gas left over it should be other sectors on pro-rata basis," a senior government official said.

The company has been asked to supply fertiliser plants, LPG extraction units, power plants and city gas distribution companies their full quota of allocation.

"We have asked Reliance not to make any cuts in gas allocated to these priority sectors," the official said.

But, in case gas production from KG-D6 fields declines further, Reliance has been asked to impose cuts in the following order for priority: CGD (domestic and transport), power, LPG and fertiliser sector.

The fall in production of gas from KG-D6 fields has meant rise in government subsidy outgo as the shortfall in cheaper feedstock in fertiliser plants is now being replaced by costlier liquid fuels. Also, less gas to power plants has resulted in lower electricity generation.

RIL has so far signed up customers for 60.76 mmscmd of gas while production currently is around 48 mmscmd only.

The government had accorded highest priority to fertiliser plants followed by LPG extraction units, power plants and city gas distribution projects in allocating KG-D6 gas.

Sixteen fertiliser plants have been allocated 15.35 mmscmd of KG-D6 gas on firm or permanent basis while 27 power plants in public and private sector have been allocated 29 mmscmd.

A sizeable 7.79 mmscmd of gas has been signed up with steel producers while LPG plants have got 2.59 mmscmd. Refineries including that of Reliance have been allocated 3.46 mmscmd, city gas projects 0.65 mmscmd and petrochemical plants the balance 1.92 mmscmd.

With fall in production, supplies to all these customers has been cut on a pro-rata basis.

The official said the government order means that Reliance will supply 47.59 mmscmd of output to priority sectors - fertiliser, LPG, power and city gas projects. If there is any gas left, it will go to steel, refineries and petrochemical plants.