EGoM meet on gas allocation cancelled

The meeting of the Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee scheduled to meet for June 9 has been cancelled as the Government has no gas for further allocation.

The Government has been caught in a precarious situation on the issue of allocation of gas as the continued decline in output of gas from the KG-D6 fields of Mukesh Ambani-owned Reliance Industries Limited (RIL) has made it difficult for it to make any further allocation. What is even worse is that the Government will be forced to take a call on the issue of cutting supplies from Reliance's KG-D6 gas fields to non-core sectors like steel plants.

Already there is a huge outcry from various sectors including those from the small and medium enterprises (MSE) of Andhra Pradesh over the non-allocation of gas. These industrial units have argued that they had expanded capacities and added new utilities on the basis of the projected output of gas from the KG basin fields. However, the sudden decline in production of gas from the RIL fields has left them in a bind.

“For what will the EGoM meet. There is hardly any gas to be allocated and in the current political heat, there is no issue of hike in diesel, LPG and kerosene prices. The price hike could come a bit later when the political atmosphere is more friendly for the ruling combine,” according to a senior Petroleum Ministry official.

The Delhi High Court is already hearing a petition by Essar Steel against Petroleum 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. At the hearing on June 3, Essar had stated that an EGoM meeting had been scheduled for June 9 and the decision to prioritise KG-D6 supplies to core sectors of fertilizer, LPG, power and city gas should be placed before it.

Output from Reliance's KG-D6 fields has dipped to about 48-49 million standard cubic metres per day from 61.5 mscmd achieved in March last year and instead of rising to planned 69 mscmd.

The Petroleum Ministry has already asked RIL 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 mscmd of KG-D6 gas, leaving very little for non-core users. Essar Steel was allocated 3.2 mscmd and it is now getting less than one-fifth of that, forcing it to challenge the move before the Delhi High Court.