The gas-based steel and sponge iron plants in the country will have to wait for an indefinite period for gas supply as the petroleum ministry has decided to accord priority to the core sector in supplying the feedstock fuel owing to falling gas production from the KG-D6 basin. Protesting the move,major utilities like Essar and Ispat have warned that changing the existing gas allocation policy not only violates the principle of natural justice but also jeopardises huge investments committed in the sector. In its letter to the steel ministry on April 21,the ministry of petroleum and natural gas (MoP&G) has said that as per the governments gas utilisation policy,priority in gas allocation from the KG-D6 fields would be given to the core sector (power,fertilisers and city gas distribution) on a priority basis and in the event of a higher production,allocations could be made to other sectors. As the gas production from KG-D6 fields has decreased to around 60 mmscmd,it is only natural that the said production be supplied first to the core sectors, according to the MoP&G missive to the steel ministry. It further said that the decision has been taken in accordance with the official gas utilisation policy under the provision of Production Sharing Contract (PSC). Hence the direction needs to be complied with, it said. The ministry cited a Supreme Court judgment on May 7,2010,where the apex court said the government owns the gas till it reaches the ultimate consumer. Further it has been held that PSC shall override any contractual obligation between the contractor and any other party, the ministry of petroleum and natural gas said. The petroleum ministry also said that after meeting the requirements of the core sector,the excess gas could be made available to the steel and sponge iron units on a pro rata basis. Refusing to agree Sponge Iron Manufacturers Association (SIMA) president V S Bapna in a letter to steel secretary PK Mishra on May 2 pointed out that the MoP&Gs directive to Reliance Industries Limited (RIL) and its partner to meet the needs of the core sector first not only goes against natural justice but also jeopardised investments already made in the sector. The sponge iron industry will have to purchase spot Regassified Liquefied Natural Gas from other sources at exorbitantly higher prices and it wont be able to absorb any increase in gas price, the SIMA pointed out.
