Govt asks RIL to cut supplies to fertiliser, power plants

The government has asked Reliance Industries to cut natural gas supplies to power and fertilizer plants so that new users like Essar Oil's Vadinar refinery can be given gas from its KG-D6 fields.

Oil Ministry this week issued written instructions to the billionaire Mukesh Ambani-run firm to make a "pro-rata" cut in gas supplies to all existing customers if the production from its KG-D6 field cannot support new customers, two sources with direct knowledge of the information have said.This follows RIL expressing inability to sign gas supply contracts with more customers owing to productionconstraints. Though RIL's Dhirubhai-1 and 3 fields in KG-D6 block can sustain an output of only 60 million cubic meters a day, the ministry has gone ahead and allocated about 64 mmscmd.

RIL, so far, has signed or committed to sign agreements for supply of 57.8 mmcmd of gas. The company told the Oil Ministry at a review meeting last month that it can only ink contracts on a firm basis for another 2.2 mmcmd as it did not want to sign for product it did not have, sources said.

Sources said the ministry had allocated gas to users, who were not ready to receive the fuel and that was the reason why at least Gas Sales and Purchase Agreements for 5.18 mmcmd of gas could not be concluded.

Users awaiting signing of GSPAs include state-run NTPC (1.14 mmcmd), Essar Oil's Vadinary refinery in Gujarat (0.6 mmcmd), Oil and Natural Gas Corp's (ONGC) LPG units (0.406 mmcmd), Rithala power plant in Delhi (0.4 mmcmd) and Bawana power plant (0.93 mmscmd).

Sources said RIL indicated its willingness to sign up with state-owned firms like NTPC and ONGC for the balance of 2.2 mmcmd uncommitted production it had but the ministry wanted others like Essar also to be accommodated.

"GSPAs have to be signed with all the customers, who have been allocated KG-D6 gas and are ready to take the gas," the ministry wrote to RIL on July 12.

"On the day that KG-D6 production is not sufficient to cater to all the consumers with firm allocation, pro-rata cuts should be imposed on all firm consumers," it added.

An Empowered Group of Ministers (EGoM) had in October last year allocated close to 61 mmcmd of KG-D6 output on firm or permanent basis. Allocations were made only to firms that said they could consume the fuel immediately as the Gas Utilisation Policy does not provide for reservation or holding up of production for anyone.

Sources said Oil Ministry allocated close to 64 mmcmd of KG-D6 gas and did not cancel allotments done to companies that failed to take deliveries according to their self- declared timelines.