Steel companies consider implications of D6 ruling

Vol 13, PW 1 (18 Jun 09) People & Policy

Until now steel producers were clamouring for D6 gas because of the persistent shortage of domestic supplies.

But those same companies are now in a dilemma, as the time approaches for them to sign Gas Sales Agreements with Reliance. Why The above ruling from the Mumbai High Court in favour of Reliance Natural Resources directs Reliance to supply the same gas at $2.34/mmbtu for which steel companies are being asked to pay $4.20/mmbtu.

“Reliance is yet to approach us to sign the agreement,â€‌ said a source at Ispat Industries. “We have asked them to start the paperwork.

â€‌ Ispat is concerned over the implications of the court ruling. “We are not sure what will happen if Reliance agrees to supply gas to RNRL in line with the court order,â€‌ adds Ispat.

“We don’t want to join the same league as fertiliser and power companies who have signed the agreements.â€‌ Essar Steel tells us it believes Reliance will appeal against the ruling.

Vikram Ispat is the most cautious. “We have begun talks with Reliance,â€‌ says Vikram.

“The initial five year agreement that they have signed with fertiliser companies and power companies has a clause regarding the ongoing court cases.â€‌ Vikram adds that it has asked Reliance for 450,000 cm/d gas against 360,000 cm/d allocated by the government.

“Our total requirement is 900,000 cm/d,â€‌ says the company. “GAIL delivers 450,000 cm/d so we asked for the same from Reliance to meet our entire requirement.

â€‌ On June 12, the oil ministry wrote to Reliance and Niko Resources asking them to sign agreements with Essar, Ispat Industries and Vikram Ispat. In our issue dated May 21, we reported that the oil ministry will allocate 3.75m cm/d gas to steel companies out of 5m cm/d allocated to the retail gas sector.

Essar gets 2.86m cm/d; Ispat will receive 530,000 cm/d, while Vikram is allocated 360,000 cm/d.