Millennium Post

Oil Ministry to move EGoM to alter gas supply priorities

With power plants, involving investments of Rs 1,00,000 crore, facing closure due to natural gas shortage, Oil Minister M Veerappa Moily on Wednesday said he will move a note for the consideration of high powered ministerial group to change priority of allocation of the fuel as well as pooling price of imported and domestic gas.

The Empowered Group of Ministers had previously accorded top priority to urea-manufacturing fertiliser plants for receipt of natural gas from Reliance Industries' eastern offshore KG-D6 fields. LPG extraction units were placed second on the list and power plants were given third priority.

This priority list essentially meant that when KG-D6 output started to fall, requirement of top priority customers in fertiliser and LPG sector was first met and remaining gas was pro-rata supplied to power plants.

With KG-D6 output falling to about 17 million standard cubic meters per day this month, there is no gas now left for power plants after meeting requirement of fertiliser and LPG sector.

Heads of leading private power producers including Anil Ambani of Reliance Power, GM Rao of GMR Group, G V K Reddy of GVK Group and Madhusudhan Rao of Lanco, first met Moily and the Planning Commission Deputy Chairman Montek Singh Ahluwalia to state that 15,000 MW of gas based plants are getting gas supplies from domestic fields at less than 10 per cent of their operating capacity, making their operations unsustainable and unvilable. In addition, 8700 MW of new gas based capacities are stranded with no gas available for commissioning of their plants.Moily said the power products suggested according power and fertiliser equal priority so that the current available gas is equally distributed among the.

Also, they suggested averaging the price of domestic gas with costlier imported gas to make fuel affordable for power plants. They also wanted augmenting the domestic supply by diverting 6 mmscmd of gas being supplied to non-core sector and reserving the new finds totalling 10 mmscmd for power sector.

'Our Ministry has to go by the decision of the EGoM regarding allocation and priority for supply of gas. One way to change the same is to convene a meeting of EGoM. I have agreed to convene the EGoM meeting to consider the issues raised by them,' he told reporters after the meeting.

'Scarcity of gas is a great problem,' he said, adding that the ministerial panel headed by Defence Minister A K Antony will discuss the issue after the ministry moves a note on the issue.

Association of Power Producers Director General Ashok Khurana said about 24,000 MW of gas-based power plants are stranded due to gas shortage. Khurana, who was part of the delegation that met Moily, said the power sector too was a priority sector and needs to be accorded same status as fertiliser.

More than two dozen power plants were allocated over 30 mmscmd of gas from KG-D6. These plants faced pro-rata cut in supplies when KG-D6 production started to dip in second half of 2010.

But there was no cut in the 15.668 mmscmd allocation to 16 fertiliser plants, which were given top priority in gas allocation. So far there has been no cut in supplies to state-owned gas utility GAIL India's LPG extraction plant, which were allocated 2.59 mmscmd of KG-D6 gas.

'The Minister (Moily) was sympathetic to our concerns,' Khurana said.Moily said the change in allocation and price pooling involved consultations with ministries of power and fertiliser and the issue has to be dealt at the level of EGoM.
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