New Delhi: The steel manufacturing sector suffered another blow on Thursday, with the Delhi high court rejecting a petition filed by Essar Steel Ltd that challenged a government decision to prioritize gas supply to certain sectors.
Faced with falling production at Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin, the government asked RIL to first supply natural gas to priority sectors such as fertilizer and power, even by stopping flows to refineries and steel plants.
The petroleum and natural gas ministry has prioritized the supply of natural gas in this order: the fertilizer sector followed by liquified petroleum gas, power, city gas distribution and steel. This leaves little or no natural gas for sponge iron makers.
Essar contended that if gas supply was to be reduced or stopped according to the stated priority, the company will not survive.
In July, the Bombay high court rejected a similar petition filed by Welspun Maxsteel Ltd.
“It is the contention of the petitioner that owing to being deprived of its entitlement of natural gas, it is suffering losses of over Rs.4 crore a day. The fight is over the limited resources of natural gas from the Krishna-Godavari basin,” justice R.S. Endlaw of the Delhi high court ruled on Thursday.
Though the court acknowledged that Essar was not going to make a profit, it reasoned that the government’s intention was to ensure that critical sectors get the requisite supply of gas.
The court dismissed the petition adding that Essar should pay Rs.4 lakh to the petroleum and natural gas ministry within four weeks as cost.