Special Correspondent

Allocation will boost profitability of steel cos

NEW DELHI: The Petroleum and Natural Gas Ministry has asked Reliance Industries Ltd. (RIL) to sell natural gas from its eastern offshore KG-D6 fields to steel firms like Essar and Ispat. The order directing RIL to sell 3.75 million standard cubic metres of gas a day (mscmd) to Essar Steel, Ispat Steel and Vikram Ispat was issued on Monday.

Official sources said the Government had identified sectors that would consume the initial 40 mscmd output from KG-D6. But some of them like CNG supply projects in cities are unable to take their entire allocation and the unconsumed portion of the fuel is now being reallocated to steel firms. Of the 3.75 mscmd of gas, Essar will get 2.86 mscmd, Ispat 0.53 mscmd and Vikram Ispat the balance . After power and fertilizer sectors, 5 mscmd of gas from KG-D6 was allocated to city gas projects which could consume only 1.1 mscmd immediately. The balance is now being distributed among steel firms. The allocation will boost the profitability of steel firms, which had been buying expensive LNG or naphtha to meet feedstock shortage at their plants.

EGoM decision

The allocation had been made in accordance with the decision of the Empowered Group of Ministers (EGoM) on April 9 to give unutilised KG-D6 gas to steel plants that are not being supplied their full share of fuel that is sold at administered prices. At present, Reliance can produce close to 40 mscmd but is restricting the output to 28 mscmd in the absence of buyers. Of the 14.97 mscmd allocated to the fertilizer sector, only 13 mscmd is being supplied because some urea-making plants are shutdown. Of the 17.99 mscmd earmarked for the power sector, only 15 mscmd is being sold while two big customers NTPC and Dabhol are yet to begin drawing the fuel.

After gas-based steel plants, allocations would be made to existing gas-fired power plants and other power plants, including captive plants, depending on the availability of the unutilised gas, the sources said.