Fertiliser companies fed by KG-D6 gas have asked Reliance Industries (RIL) to make good losses arising out of the shortfall in supply. They cited a clause in the Gas Transport Agreement that states any supply shortage would be compensated by the seller, not by the buyer, in support of their claim.
RIL supplies gas through a separate entity of its own, Reliance Gas Transportation Infrastructure. The KG-D6 gas is transported to the fertiliser companies by inter-connecting with pipelines of GAIL and Gujarat State Petronet. The supplies dropped 12-14 per cent during January-March.
“We normally get around 0.6 million standard cubic meters (mmscmd) gas from RIL, but we have been facing a short supply since mid-December 2010. We have been getting gas in the range of 88 to 93 per cent since then. We are now required to pay GAIL ship or pay charges in case of utilisation of less than 95 per cent capacity. And since RIL supply has been below 95 per cent from mid-December 2010, GAIL has asked us to pay a penalty for the shortfall. We have taken up the matter with RIL,” Ajay Shriram, chairman and senior managing director of DCM Shriram Consolidated, told Business Standard.
Meanwhile, some companies have asked RIL to evoke the Force Majeure clause that stipulates if there is shortfall in production due to a technical failure or for some unforeseen reason, then the penalty is waived.
“RIL had been transporting the gas through its own entity. So, they should bear the loss, else the transportation agency would be penalising us. RIL can also call it a Force Majeure situation and waive off the penalties, as currently, only 80-88 per cent of the pipeline is getting utilised. We are awaiting the response from RIL and the Department of Fertilizers on this issue,” said Rakesh Kapur, joint managing director of IFFCO. It takes RIL’s gas for its plants in Kallol and Aonla.
The Fertiliser Association of India (FAI) has also raised the issue with the Petroleum and Natural Gas Regulatory Board (PNGRB).
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“Every (gas) transportation agreement has different clauses and is tilted towards the seller, making the consumers suffer. We have raised the matter with the PNGRB, but have not got any concrete response from them yet,” said Satish Chander, director general, FAI.
The government has fixed the cost of KG-D6 gas at $4.2 per million British thermal unit (mmBtu). However, the fertiliser companies end up paying around $7 per mmBtu. They are resorting to imported gas in the absence of fixed gas supply from domestic sources. It is costing them $12-18 per mmBtu, excluding the transportation cost, adding to their financial burden.
RIL supplies KG-D6 gas to Nagarjuna Fertilizers and Chemicals, Rashtriya Chemicals and Fertilizers, IFFCO, Krishak Bharati Cooperative, Gujarat State Fertilizers & Chemicals, Gujarat Narmada Valley Fertilizers Company, Tata Chemicals, National Fertilizers, Chambal Fertilisers and Chemicals, KRIBHCO Shyam Fertilizers and IndoGulf Fertilizer & Shriram Fertiliser & Chemicals.
An empowered group of ministers had asked RIL to ensure a steady supply of 15.708 mmscmd gas to the fertiliser sector, compared to about 13 mmscmd that the sector is getting at present. It had also directed RIL to allocate 63.309 mmscmd of KG-D6 gas to the priority sectors, identified by the government, such as power, fertiliser, city gas distribution companies, steel, liquefied petroleum gas, refinery and petrochemical.