EGoM meeting on natural gas allocation cancelled

EGoM meeting on natural gas allocation cancelled

New Delhi: A meeting of a ministerial panel on allocation of natural gas has been cancelled possibly to avoid oil ministry the blushes on the issue of cutting supplies from Reliance’s KG-D6 gas fields to non-core sectors like steel plants.

The empowered group of ministers (EGoM) on pricing and utilization of gas headed by finance minister Pranab Mukherjee was scheduled to meet at 1630 hours on 9 June but the meeting has been cancelled, a top source said on Monday.

“The finance minister’s office had on May 26 issued a notice for the meeting but on June 3 the meeting was cancelled," he said.

On that day, the Delhi high court was hearing a petition filed by Essar Steel against oil ministry’s directive to Reliance to stop supplying gas from its eastern offshore KG-D6 fields to non-priority sector in view of decline in output.

Essar had challenged the decision saying only EGoM, which had in first place made allocation of KG-D6 gas to urea manufacturing units, LPG plants, power plants, sponge iron units, petrochemical plants and city gas distribution firms.

At the hearing on 3 June, Essar had stated that an EGoM meeting has been scheduled for 9 June and the decision to prioritize KG-D6 supplies to core sectors of fertilizer, LPG, power and city gas should be placed before it.

The HC asked the government to respond to this and additional solicitor general A. S. Chandhiok came back to the court after two hours to state there was no EGoM on 9 June.

Industry sources said perhaps the EGoM was cancelled at the last moment because it would have been a big embarrassment for the oil ministry if the high court would have asked the supply curtailment decision to be put up at the EGoM.

Oil ministry has all this while maintained that it was competent to take such a decision.

The ministry, however, reluctantly agreed to placing before the court an affidavit on behalf of the EGoM ratifying its decision.

Output from Reliance’s KG-D6 fields have dipped to about 48-49 million standard cubic meters per day from 61.5 mmscmd achieved in March last year and instead of rising to planned 69 mmscmd.

Oil ministry had ordered Reliance to meet the full requirement of consumers in priority sectors of fertilizer, power, city gas distribution and LPG plants and supplies to non-core sectors be made only if there is gas left after that. Priority sector has been allocated 47.5 mmscmd of KG-D6 gas, leaving very little for non-core users.

Essar Steel was allocated 3.2 mmscmd and it is now getting less than one-fifth of that, forcing it to challenge the move before the Delhi high court.

In the week ended 22 May, KG-D6 produced about 48 mmscmd.

Of this, 14 mmscmd was sold to fertilizer plants and another 26.5 mmscmd to power plants.

The remaining 7.5 mmscmd was consumed by other sectors like sponge iron plants, LPG, city gas distribution networks and petrochemical/refineries.

Sources said the EGoM meet on 9 June may have served as the ratification authority of oil ministry’s decision to curtail supplies to non-core sectors like steel plants in view of fall in output at KG-D6 fields.

The high court has so far not stayed the decision but if it were to direct the oil ministry to get the decision ratified by the EGoM, the meeting would have served that purpose, sources said.