In a major revamp of natural gas allocation policy, the government will give city gas projects selling CNG to automobiles and piped cooking gas to households top-most priority for receipt of domestically produced gas.

Presently, urea-manufacturing fertiliser plants have the first right over the domestically produced gas, followed by liquefied petroleum gas (LPG) plants and power stations. City gas distribution (CGD) projects are ranked fourth currently.

This priority listing is now being changed to give CGD firms like Indraprastha Gas Ltd (IGL), which sells CNG to automobiles and piped gas to households in national capital, top priority, official sources said.

CGD firms like IGL currently get 8.32 million standard cubic meters per day of gas out of total domestic supplies of about 77 mmscmd.

As city gas projects get rolled out in newer cities, the requirement of the sector will grow and so the government is now giving it top priority.

Sources said compressed natural gas (CNG) and piped natural gas (PNG) are clean fuels and will help replace subsidised diesel in automobiles and LPG in households respectively.

According to the new allocation policy being finalised, additional requirement for CGD will be first met by imposing proportionate cuts in the domestic gas presently being supplied to sectors other than priority sectors as decided by the Oil Ministry.

Plants providing inputs to stretegic sectors of atomic energy and space research will get the second priority, followed by plants that can extract higher fractions from natural gas.

Gas-based urea plants will rank fourth in the priority list and power stations fifth.

Since domestic gas production is now stagnant, it is being proposed to freeze allocation to all sectors expect CND and LPG sector, at supply levels of 2013-14.

In 2013-14, fertilizer plants received 29.79 mmscmd of gas. Power plants got 25.59 mmscmd while LPG extraction plants received 1.83 mmscmd. Petrochemical plants received 3.32 mmscmd while refineries got 1.89 mmscmd and steel plants 1.32 mmscmd.

Sources said incremental production from NELP blocks like KG-D6 and Gujarat State Petroleum Corp’s (GSPC) Deendayal gas will be allocated as per the decision taken in the meeting of an Empowered Group of Ministers (EGoM) on August 23, 2013.

The EGoM had decided that incremental gas would go to power plants.

Since the BJP government has wound-up the EGoM on gas pricing and allocation, the new priority list is being vetted by a Committee of Secretaries (CoS) and a finl order is likely to be issued shortly, the sources added.

Sources said that in the current gas utilisation policy there are ambiguities.

For example, gas-based urea plants get top priority for gas produced from NELP blocks like Reliance Industries’ KG-D6 but gas from nominated block with state-owned ONGC can go to all fertiliser plants irrespective of whether they manufacture urea or not.

Also, there is ambiguity regarding extraction of higher fractions like C2, C3 and C4 (which are used for manufacture of petrochemicals). These fractions can be extracted by petrochemical and LPG plants but their ranking priority is lower.

The requirement of CGD project is quite small compared to power and fertiliser sectors and can be met through proportionate cuts, they said.

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