Taxpayers money wasted on IFFCO and Indo Gulf

Vol 15, PW 25 (28 Jun 12) Midstream & Downstream

Conspiracy theorists wonder aloud why the oil ministry took so long to tell Reliance to sign two more GSPAs for D6 gas with urea fertiliser producers Indo Gulf and IFFCO.

Arunoday Goswami, an oil ministry undersecretary, on June 18 at last directed Reliance to sign agreements with IFFCO for 270,000 cm/d of D6 gas for its Phulpur factory in Uttar Pradesh and with Indo Gulf for 228,000 cm/d at its Jagdishpur factory, also in UP. Why, you might ask, did the directive come four months after the Empowered Group of Ministers (EGoM) made the allocations on February 24 In the interim both IFFCO and Indo Gulf had to rely on expensive spot R-LNG at $20/mmbtu, costing the government, and by default the Indian taxpayer, $24m in fertiliser subsidies paid to the two fertiliser producers.

If these companies had received cheaper D6 gas at $7/mmbtu over the last four months, we hear, they could have saved $195,000/day or $6m/month. “Nobody else would buy this high priced spot R-LNG,” we hear.

“Not even power companies.” Urea producers must get top priority to receive D6 gas, under a cabinet panel ruling announced on May 28, 2008.

Next in line are LPG ‘fractionators’ followed by power stations and CGD networks. Yet the ministry bizarrely strayed from this prescribed order and on April 13 directed Reliance to sign GSPAs with NTPC for 2.16m cm/d of D6 gas; and state-owned Pragati Power for 836,000 cm/d.

Again, on April 18, the ministry told Reliance to sign GSPAs for 374,000 cm/d to 11 CGD operators (see below). But it left the fertiliser sector GSPAs till last!