The first tranche of gas from Reliance Industries’ (RIL) block in the Krishna-Godavari (KG) basin will be made available only to 15 urea units of major fertiliser companies, according to a senior government official.
The fertiliser companies that will benefit include Chambal Fertilizers and Chemicals, Indian Farmers Fertilizer Cooperative (IFFCO), IIFCO, Krishak Bharati Cooperative Ltd (KRIBHCO), Tata Fertilizers and Indo Gulf Fertilizers, a unit of Aditya Birla Nuvo Ltd.
The only power company that may get gas on priority after the demand from the fertiliser companies is met is Ratnagiri Gas and Power Projects Pvt Ltd (RGPPL), originally called Dabhol Power Co. RGPPL will receive 8.4 million cubic metres per day (mcmd) gas from the KG basin from October this year as the company has already tied up with Gail for buying 5.4 mcmd till September. The company will pay $5.60 per million British thermal unit (mBtu) to RIL after adding transport costs and taxes. The gas will help RGPPL generate power at its full capacity of 2,150 Mw.
| WHO GETS HOW MUCH |
| * First 14 mcmd will go to fertiliser units only |
| * This gas will help produce additional 1-1.5 million tonnes of urea a year |
| * Allocation of the second tranche of gas to be decided by the empowered group of ministers later |
A senior official of the Ministry of Petroleum and Natural Gas told Business Standard on condition of anonymity that RIL had been notified about the decision.
“We have informed the operator of our decision. We have followed the gas utilisation policy and decided to supply to urea units of fertiliser plants first. RGPPL will also be given gas on priority,” the official said.
During a meeting between officials of petroleum and power ministries last week, it was decided to stick to the policy and the decision of the empowered group of ministers. According to the gas utilisation policy, which all gas producers are to follow, fertiliser and power units get priority.
Urea plants across the country converted to gas from naphtha a year ago. Companies Business Standard spoke with said they used naphtha or imported gas, which more than doubled their cost. At present, the fertiliser industry operates on around 28 mcmd gas when it needs around 41 mcmd.
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IFFCO will receive around 3.5 mcmd from the KG basin for its five urea units. “With additional gas, we will be able to replace our naphtha-based plants. It will enhance our production by 5 per cent,” said Managing Director US Awasthi.
Awasthi added the gas would help produce additional 1-1.5 million tonnes (mt) of urea in the country and help the government save around Rs 4,000 crore, that is, 10 per cent of the annual expected fertiliser subsidy bill of Rs 40,000 crore.
Chambal Fertilizers will get around 1.1 mcmd from the KG basin. But the company says this may not lead to any drastic increase in its urea output. The company will increase its urea producing capacity by 10 per cent from the current 1.9 mt a year if more gas is available.
RIL will begin production from its D6 block in late February. While the initial production from the block is likely to be around 14 mcmd, it is likely to be ramped up to 80 mcmd within a year.