EGoM turns down the proposal of diverting supply of gas from urea sector

18 Jul 2013 Evaluate

The empowered group of ministers (EGoM) on gas allocation headed by Defence Minister A K Antony, after its crucial meeting has decided not to divert supply of domestic gas from urea manufacturers to the power sector, and instead has asked the fertiliser ministry to reassess its demand and spare some gas, while the EGoM will meet again on next week to find some solution for the power sector. The meeting was called after power sector pressed for abolishing the priority ranking, as with the current priority ranking when output from RIL's KG-D6 fields started falling in 2011, supplies to refineries was cut first, then steel and city gas sectors. Oil ministry suggested three options for gas produced from blocks auctioned under the New Exploration Licensing Policy (NELP). First option was to treat fertiliser and power sector customers equally. Second was to give equal priority to all core sector customers, including LPG and city gas, and third was to maintain status quo.

Turning down the proposal that would have resulted in fall in urea production during peak kharif season, the panel said that “Agriculture season is very good and we need to protect their requirement. At the same time, power should also get gas.” Stating that gas requirement of power plants should also be ensured; Petroleum and Natural Gas Minister Veerappa Moily indicated that untied fuel from fields of state-owned Oil and Natural Gas Corp (ONGC) can be committed to the sector.

Currently, urea manufacturers get 32 million standard cubic metres per day (mmscmd) of cheaper domestic gas and import about 9 mmscmd against their total demand of 43.14 mmscmd. They consume all of about 14 mmscmd per day of gas produced from Reliance Industries' eastern offshore KG-D6 fields, if the proposal of giving power sector equal weightage would have been accepted, total gas supply to urea plants would have gone down to 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. While, the fertiliser ministry has agreed to review the sector's requirement, it has been reported that the government on its part will allow raising fertiliser subsidy marginally if the move would benefit the economy. The gas output of D6 has dropped from 62 mmscmd three years ago to about 14.2 mmscmd.

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EGoM turns down the proposal of diverting supply of gas from urea sector

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