Disbelief as Gujarat Gas announces more supply cuts

Vol 12, PW 20 (12 Mar 09) Midstream & Downstream

Industrial gas buyers in Surat, Ankleshwar and Bharuch are in a state of shock following a decision by local retailer Gujarat Gas to restrict supplies to just 66% of what they’ve contracted.

Their anger is compounded by a March 3 notice to the Mumbai Stock Exchange from Gujarat Gas that wholesale supplies from GAIL “have been restored to the levels almost to those prior to the Force Majeureâ€‌ announcement that temporarily halted 3.5m cm/d supplies to GAIL from the Tapti gasfield because of a damaged 28-inch diameter gas pipeline. “Due to further reduction in the supply levels from our gas supplier,â€‌ writes Gujarat Gas to customers on March 6, “supplies to your unit will be reduced and the Restricted Supply Level (RSL) under the Gas Supply Agreement (GSA) with effect from March 9, 2009, will be 66% of the Daily Contracted Quantity (DCQ) till further notice.

â€‌ Distressed factory owners tell PETROWATCH of massive lay-offs to come as industrial production falters, following the sharp drop in gas supplies: first from 83% of the DCQ in January, then to 72% on February 12, and finally to 66% from March 9. “We have lost our competitive sheen,â€‌ says Parmod Chaudhary, president of the South Gujarat Textile Processors Association, hard hit by the cuts.

“From one-week layoffs we are heading towards three-week layoffs.â€‌ Worse, Chaudhary complains that Gujarat Gas charges a “hefty 100%-plus extrasâ€‌ for any additional gas used above the 66% threshold.

Customers are normally charged Rs11.50/cubic metre but will now have to pay Rs23.210 for any “excess gasâ€‌ used. Ravindra Arya of Bindal Silk Mill is equally bitter.

“It is no joke to close down a running mill with over a 1000 people at work on different processes at such short notice,â€‌ he says. “It results in huge losses for the mills; the entire production process is disturbed.

â€‌ Gujarat Gas has also bucked a trend to reduce gas rates when on February 1 it hiked the price of gas for industrial users by 14% to Rs11.50 from Rs10.064/cubic metre