Gujarat industries accuse GAIL of taking arbitrary action

Facing shutdown due to drastic cut in natural gas supplies, over two dozen small industries of South Gujarat have accused state-owned GAIL India Ltd of selectively and arbitrarily taking action that is in contravention of stated policy.
GAIL on September 27 slashed gas supplies to 30 small industries in South Gujarat to meet fuel requirement of CNG and piped cooking gas supplies in cities.
South Gujarat industries including Pragati Glass, Piramal Glass, Haldyn Glass, Gujarat Borosil and Savana Ceramics are facing closure as they cannot afford imported LNG that costs four times the domestic gas price of USD 4.2 per million British thermal unit.

They on October 1 wrote to GAIL saying its action to impose cut in gas supply is "arbitrary and unjustified and not in conformity with the provisions of the Gas Supply and Transportation Agreement (GSTA) signed by the state-run firm.
"It has pushed us to the verge of closure resulting in huge losses/damages and suffering to the workers," they wrote.
The total allocation to 30 small consumers in South Gujarat put together is merely 0.6 million standard cubic meters per day. The proposed cut is being forced to make about 0.35 mmscmd available for PNG/CNG use.

The industries quoted a June 20, 2005 Allocation of Pricing of Natural Gas order issued by Oil Ministry to state that regulated or APM gas was envisaged to be supplied to priority sectors of power, fertilizer along with the specific end users committed under court orders/small scale consumers having allocations up to 0.05 mmscmd, against their existing allocations.

"The said Order further states that in case of reduction in availability of this gas (APM gas) in future, the supplies to APM consumers would be reduced on a pro-rata basis. It leaves no doubt that all the APM consumers have equal priority in supply of APM gas and if any cut is imposed that shall be across the board on all the consumers," they said.
This principle of equality and proportionate cut in gas supplies, in case of reduction in availability, was reiterated in the APM Gas Pricing Order of Government issued by the Ministry on May 31, 2010. This policy on supply of APM gas has remained unchanged since.

While small consumers having allocations up to 0.05 mmscmd are priority consumers at par with power and fertilizer consumers of APM gas, GAIL has effected cut only on South Gujarat industries claiming they are non-priority consumers.
The industries said GAIL's letter intimating of a cut in supplies did not spell out who are the 'non-priority' consumers of APM gas.
"Thus, the action of GAIL to selectively cut supplies to our plants is unreasonable, arbitrary, not supported by government policy and outside the contractual provisions of GSTA," they wrote, seeking immediate restoration of supplies.