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Fertiliser ministry seeks clarity on Reliance gas

The ministry has urged petroleum ministry to examine whether gas is required from the Reliance group to meet a current shortage of gas.

business Updated: Jun 12, 2007 21:49 IST
M Rajendran
M Rajendran
Hindustan Times

The chemicals and fertilisers ministry has asked the petroleum and natural gas ministry to examine whether gas is required from the Reliance group to meet a current shortage of gas for the sector and also to meet increasing requirements in the future.

Fertiliser Secretary JS Sarma, in a letter to his counterpart MS Srinivasan in the petroleum ministry, urged an assured supply of the input.

Fertiliser makers are worried about terms and conditions attached to gas generated by Reliance Industries Ltd (RIL) from its offshore fields, while the units are keen to have an assured supplies with a clear idea of the price involved. An RIL spokesman offered no comment.

Fertiliser department sources say that there is likely to be a 21 per cent shortfall in the supply of gas to fertiliser units over the next few years, while demand is expected to double over the next five years.

Fertiliser makers also use naphtha or imported LNG (liquified natural gas) as feedstock to power plants, but it costs about $14 per million British thermal units (mBtu) while imported LNG is sold at $9-10 per mBtu.

Sarma has pointed in the letter that Reliance Industries Ltd (RIL) has invited price quotations from five fertiliser companies for sale of natural gas from the Krishna-Godavari basin’s Dhirubhai (KGD) block 6 in Andhra Pradesh. Reliance is expected to extract 40 to 50 million cubic metres of gas in its first year of operations from this project.

The fertiliser companies have sought the department’s guidance in the matter and have expressed their apprehensions on the various terms and conditions for the supply of gas and pricing formula spelt out by RIL.

"They have indicated that they are not in a position to indicate any firm price to RIL in absence of approval from Department of Fertilisers as fertiliser subsidy is dependent upon the price of feedstock," Sarma said in his letter.

On the issue of gas pricing, there is already a Committee of Secretaries under the chairmanship of the petroleum secretary. Sarma has said in his letter that this panel can address gas pricing for the fertiliser sector and urged Srinivasan to convene a meeting of the committee to resolve the issue soon.

First Published: Jun 12, 2007 21:45 IST