Steel cos move court for KG basin gas share

Rahul Wadke Debabrata Das Mumbai | Updated on May 07, 2011

No rationale for supplies to priority sectors, say firms

There is no rationale nor is public interest being served in the recent Government directive allocating all of the gas produced from KG-D6 to priority sectors, say steel-makers Welspun Maxsteel, Ispat Industries and Essar Steel that are as a result facing a cut in their gas supply. Welspun and Ispat, along with Essar Steel have moved court seeking a stay order on this directive.

The companies will not get gas from the KG-D6 basin if Reliance Industries Ltd (RIL) follows the April 21 directive of the Ministry of Petroleum and Natural Gas.

The Ministry directed that all of the 50 million standard cubic metres of gas per day (mscmd) produced from the KG-D6 basin be allotted to priority sectors (power, fertiliser, LPG) leaving nothing for the non-priority sectors such as steel.

Welspun and Ispat filed a writ petition in the Bombay High Court, while Essar Steel has approached the Delhi High Court. The companies claim that there is no rationale for directing more than 40 mscmd of gas from KG-D6 to the priority sectors and based their arguments on the resolutions passed by an Empowered Group of Ministers (EGoM) in 2005.

The EGoM's resolutions stated that priority sectors will be allocated 40 mscmd from KG-D6, while the balance will be distributed amongst non-priority sectors such as steel. It was a specially constituted EGoM for pricing and commercial utilisation of natural gas under the New Exploration Licensing Policy (NELP)

Gas production from KG-D6 has fallen from 62 mscmd in March 2010 to 50 mscmd now. In view of this, the Ministry of Petroleum and Natural Gas issued a directive in April telling RIL to stop providing gas to non-core sectors.

The petitioners said that the April 21 directive of the Ministry of Petroleum and Natural Gas was illegal, arbitrary and that it violated the guidelines issued in 2005 by the EGoM. Another bone of contention is the petitioners' claim that there was no consultation with them before the change in KG-D6 gas allocation was done.

The EGoM's resolution in 2005 had also stated that any change in this allocation would require consultation of the ministries and stakeholders concerned.

Welspun and Ispat have also pointed out that priority should be given to existing natural gas-based sponge iron/steel plants after city gas distribution, power, LPG and fertiliser companies have received their share of gas of 40 mscmd.

They have also asked for an exhaustive investigation to be conducted in the manner in which RIL and its joint venture partner, Niko, are extracting gas from KG-D6 and issue directions to RIL so that maximum production levels form the gas field are attained.

In 2000, under the NELP-1, RIL had won a gas block of the coast of Andhra Pradesh where KG-D6 gas field is located.

Published on May 07, 2011

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