GAIL under fire over D6 gas supply to fertiliser firms

Vol 13, PW 1 (18 Jun 09) Midstream & Downstream

Angry fertiliser companies are planning to complain about GAIL to the downstream and gas regulator over inconsistencies in the supply of D6 gas.

At issue is the transportation agreement between each of the fertiliser companies and GAIL for D6 gas through GAIL pipelines. This agreement is one of three: the first is a Gas Sales Agreement (GSA) with field operator Reliance; and the second is a Gas Transportation Agreement (GTA) with Reliance subsidiary Reliance Gas Transportation Infrastructure (RGTI).

“Our GSA with Reliance and the GTA with Reliance Infrastructure are fully synchronised,â€‌ reports a disgruntled source in one of the affected companies. “But GAIL’s GTA is not synchronized with these two agreements.

â€‌ By far the biggest headache to hit fertiliser companies is the timing of gas nomination. “We must indicate our gas requirement to Reliance for the following day by 12:00 noon,â€‌ he adds.

“But GAIL sends us information as to how much it will supply by 8pm in the evening!â€‌ GAIL’s inability to respond earlier means buyers have no control over how much gas will be supplied the next day. “If GAIL offers less quantity,â€‌ we hear, “it is too late to arrange alternative supplies and it becomes difficult to reject excess quantities, leading to penalties.

â€‌ Another contentious issue is GAIL’s method of calculating the calorific value of gas. “Reliance and RGTI use net calorific value but GAIL follows gross calorific value,â€‌ we are told.

“This leads to a mismatch between the gas quantity recorded between Reliance, RGTI and GAIL and fertiliser companies are held responsible for the imbalance.â€‌ Complaints are also rife about the lack of timely information.

“Gas transporters do not pass on the information on time,â€‌ we hear. “This means we pay imbalance charges.

â€‌ Luckily Reliance hasn’t yet started charging because it permits a six-month â€کpenalty-holiday’ during commissioning but GAIL allows only three-months and penalty charges for fertiliser companies already amount to several hundred thousand rupees. “Let’s hope power companies do not suffer as we are,â€‌ says a fertiliser company source.