Ambani deal will be bad news for other fertilizer and power consumers

A deal between the Ambani brothers for gas from the D-6 block is bad news for other priority sector consumers waiting in line for gas.

If the entire chunk of 27 mmscmd of gas from the D-6 block -- when production is scaled up from the current level of 80 to 120 mmscmd -- goes to Anil Ambani, the country`s ambitions of setting up a spate of fertilizer plants to free itself from the clutch of oligopolistic global fertilizer producers, which raise prices when India enters the market to top up its supply of urea, will remain unfulfilled.

In terms of priority, fertilizer plants have been given a higher weightage than power plants because the it is the chemical composition of the gas which is used to make nitrogenous fertilizers.

In comparison, gas is used only as a source of heat to manufacture power which can be done through the use of coal, w hich is also cheaper than gas.

Gas allocations to fertilizer plants or to other power plants as well as to steel and city gas distribution projects may then have to wait the supply fresh gas from other sources in the KG and Mahanadi basins. And this may take time.

In this context, it is possible that if the brothers agree to a deal, the government may temper the allocation to Anil Ambani in order to ensure a proportionate allocation to other priority sector consumers.