Argument deepens over D6 gas promises

Vol 14, PW 6 (09 Sep 10) People & Policy

Many were disappointed by the above cabinet panel meeting because no new D6 gas allocations were made.

This is hardly surprising because cabinet ministers are already having problems reconciling the mismatch of 63m cm/d of D6 gas they have allocated against the 60m cm/d that’s being produced. Disgruntled power and fertiliser companies are particularly sore.

They criticise the oil ministry for promising D6 gas in January to new and future city gas projects and want those allocations scrapped. In India, power and fertiliser industries are priority sectors for gas allocations.

But a fertiliser sector source complains the ministry has earmarked cheap D6 gas for city gas players who cannot draw supplies, while ‘priority sector’ companies with immediate shortfalls are compelled to use expensive R-LNG. Take privately-owned Chambal Fertilisers, which is using around 2m cm/d of R-LNG from IndianOil but wants to replace this with D6 gas.

Chambal has found customers willing to take its contracted R-LNG from IOC and has even committed to pay GAIL’s transportation tariffs for the rest of its 25-year contract. Chambal wrote letters to the oil and fertiliser ministries before the July 28 cabinet meeting asking for D6 gas, but to no avail.

Instead, complains our source, the oil ministry seems more concerned about getting Reliance to sign D6 contracts with the likes of Bhagyanagar Gas, Soumya DSM, GAIL Gas and Adani Energy. Except for Adani’s existing operations in Ahmedabad in Gujarat, all the other allocations are for future projects, some of which could take years to complete.

“At no point have new projects in any sector been allocated D6 gas,” says an observer. “So why is there this favouritism towards CGD (City Gas Distribution) companies On one hand the government says fertiliser and power are priority sectors but it keeps allocating (scarce D6 gas) to the steel, refinery and CGD sectors!”