No change in gas supply preference, urea remains top priority

Fearing backlash from farmers, a high-powered ministerial panel today rejected a proposal to cut natural gas supplies to urea plants and divert that fuel to power companies.

Fertiliser plants will continue to enjoy top priority in receipt of scarce natural gas after an Empowered Group of Ministers (EGoM) headed by Defence Minister A K Antony turned down the proposal that would have resulted in fall in urea production during peak kharif season.

'Today's decision is that the requirement of fertiliser for the agriculture sector will be fully protected. While doing that possibilities are being explored whether any additional gas can be made available to power sector,' Oil Minister M Veerappa Moily said after the EGoM meeting.

The ministerial panel, he said, would meet again on Monday to discuss methodology of making available gas from other sources to power sector in the short term and medium term.

'Agriculture season is very good and we need to protect their requirement. At the same time, power should also get gas,' he said.

The EGoM meeting was convened to consider abolishing the priority ranking in natural gas allocation so that the fuel currently consumed by urea plants can also be diverted to fuel-starved power plants.

Currently, fertiliser plants consume all of the 14 million standard cubic metres per day of gas produced from Reliance Industries' eastern offshore KG-D6 fields. No gas flows to 25 power plants that had signed up for 29.74 mmscmd of KG-D6 gas.

If the proposal for giving power sector equal footing with fertiliser would have been accepted, it would have meant that gas supply to urea plants going down by 9.07 mmscmd forcing an import of 4.54 million tonnes of urea at an additional subsidy burden of Rs 5,372 crore per annum.