New gas policy to form basis of R-Adag allocation

New gas policy to form basis of R-Adag allocation
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First Published: Tue, May 25 2010. 08 25 AM IST
Updated: Tue, May 25 2010. 08 25 AM IST
The timing couldn’t have been better for Anil Ambani.
A day after he and his brother Mukesh Ambani, who had fought a bitter battle over gas for?around four years, signalled that all was well between them again, and 16 days after the Supreme Court (SC) ruled that the state had the final say in all matters related to natural gas, two officials in the power ministry said that the government is evolving a gas linkage policy to determine which power project would be eligible for gas allocation.
The fact that the government is working on such a policy was first reported in early May by the Business Standard.
“The policy will form the basis of gas allocation to those who have applied for gas. If they (Reliance Power) have applied to us for gas, the policy will form the basis for their allocation,” power minister Sushil Kumar Shinde told Mint.
Since the new policy will reserve 35% of available gas for new independent power projects, projects of the Reliance-Anil Dhirubhai Ambani group (R-Adag), such as the one being developed by Reliance Power Ltd (RPL) at Dadri in Uttar Pradesh, too, would be eligible to receive gas. Interestingly, such a linkage is the precondition, set by the power ministry, for power companies to be eligible for gas allocation in keeping with the country’s gas utilization policy defined by the empowered group of ministers (eGoM).
RPL has applied for the gas to India’s apex power sector planning body Central Electricity Authority (CEA), according to a former government official familiar with the development who did not want to be identified. The gas was at the centre of the fight between the Ambani brothers. Anil Ambani’s Reliance Natural Resources Ltd, citing a family agreement between the brothers, had laid claim to gas from Reliance Industries Ltd’s (RIL) block in the Krishna-Godavari basin, to fuel the gas-based power plant of its associate RPL. Mukesh Ambani’s RIL had expressed its inability to supply gas to a buyer not listed in the government’s gas utilization policy and at a price not set by the state. The matter went to court and SC agreed with RIL, but asked the two brothers to resolve the issue in keeping with the government’s policy on gas utilization and pricing.
Since then, the focus has shifted to the government’s gas linkage policy, which will decide which power plant gets gas and which doesn’t. “We will form a criteria for recommending gas linkages, which will depend on several parameters such as status of land acquisition, water linkage among others,” said a power ministry official who did not want to be identified.
Mint understands that the gas linkage policy will be akin to the coal linkage policy approved last year and will be based on a points system, with a maximum of 100. Work on the policy began in December 2009 at CEA, which submitted it to the power ministry for approval in February.
Gas is allotted to customers by the government in line with the gas utilization policy that prioritizes users: existing fertilizer units rank first, followed by existing power, petrochemical and city gas projects. New projects aren’t high up on the priority list. An eGoM headed by finance minister Pranab Mukherjee decides upon the allocation, which also has Shinde, home minister P. Chidambaram, law minister Veerappa Moily and petroleum minister Murli Deora as members. R-Adag did not respond to emailed queries from Mint.
The policy will serve as the basis for CEA to allocate gas. “Until and unless the policy is decided by the power ministry, we can’t process the applications. This is a very detailed exercise. Subject to the availability of gas we expect a gas based capacity of around 25,000MW in the 12th Plan period,” said Gurdial Singh, officiating chairman and member (hydro power), CEA.
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First Published: Tue, May 25 2010. 08 25 AM IST