An Empowered Group of Ministers may meet next month to decide if exceptions to the present policy can be made so that Anil Ambani Group's proposed power plants can get fuel from Reliance Industries's KG-D6 fields by reserving or blocking certain volumes for it.
The government's Gas Utilisation Policy does not provide for reservation or blocking of natural gas for plants that have only been proposed and all of the output from KG-D6 fields has been allocated to units that said could consume the fuel immediately.
"KG-D6 fields have finite resources and a limited output. So if supplies have to be made to certain plants that will come up in future, then output will have to be capped and volumes above that reserved for production when that particular unit comes up," a top source said.
Alternatively, the government will have to cut supplies to existing customers to accommodate future plants of ADAG.
RIL and ADAG firm RNRL Friday said they have entered into a new Gas Sales Master Agreement that outlines the terms on which Mukesh Ambani-run firm would supply gas.
Within hours of signing the GSMA, which as per the Supreme Court directive is in line with the government's pricing and utilisation policy, was submitted to the Oil Ministry for action.
The source said the EGoM headed by Finance Minister Pranab Mukherjee may meet in the next two weeks to consider changes in the present policy, as also to explore allowing ADAG to jump the long queue of power plants, fertilizer units and refineries that are seeking gas.
The GSMA, he said, does not mention of volume, tenure or price of gas but only lists the requirement of gas at ADAG's proposed units including the 7,800 MW Dadri plant near here and Shahapur plant in Maharashtra. The supplies may have also been sought for expansion of 220 MW Samalkot plant in Andhra Pradesh, 48 MW Goa project and 165 MW Kochi plant.
RIL has till date signed up for 57.8 million standard cubic meters per day of its output on long term contract. It has told the Oil Ministry that it can sign up for another 2.2 mmscmd on long term since output from KG-D6 can be sustained only at 60 mmscmd.
The peak output of 80 mmscmd from KG-D6 fields, set to kick-in sometime next year, is to last for 7-8 years.
The source said the government has set a price of USD 4.20 per million British thermal unit for output from KG-D6 fields for five years till March 31, 2014 after which it will be revised.
ADAG plants may be at least 27-30 months away from taking first gas.
The apex court had last month rejected ADAG plea to get gas from RIL at concessional rates of USD 2.34 per mmBtu for 17 years under a family agreement, saying the government alone has the right to approve the price and fix its users.
The source said once gas allocation is approved by the EGoM, RIL will enter into Gas Sales and Purchase Agreements (GSPA) with specific plants of ADAG at price and tenure determined by the government.
The present allocations made under the Gas Utilisation Policy are for five years ending March 31, 2014, but are expected to be renewed.
An Oil Ministry official had last week stated that ADAG plants may be considered for allocation of gas six months prior to the commissioning.
"Anyone wanting natural gas for their plants, be it in fertiliser, power or any other sector, the allocation is to be made (to them) closer to the time when they can actually consume that gas," he had said.
Incidentally, Reliance Industries Chairman Mukesh Ambani last week told company shareholders that his firm will supply gas to ADAG plants as and when they are ready and it is subject to the allocation being made by the government.
"The allocations till now have been made on a non discriminatory principal. We had not tried to give preference to any unit or company over others," the official had said.
ADAG's Dadri plant near here is two-and-half years away from beginning operations, while any expansion of its Samalkot plant in Andhra Pradesh too may not happen before the second half of 2012. A new unit that ADAG may set up by either relocating Dadri or as a greenfield project in states like Andhra Pradesh and Maharashtra, may also take 24-36 months to commission.
The UP government had in January this year started taking repossession of land given to Reliance Power in Dadri, following a December 2009 order of the Allahabad High Court that quashed the land acquisition in 2004 by the then state government headed by Mulayam Singh Yadav.
The EGoM headed by Finance Minister Pranab Mukherjee, had on October 27, 2009, allocated gas to power plants, petrochemical units and refineries that said they would be ready to consume fuel by February/March.
All the plants that would be commissioned or would begin usage of gas after April 2010 were to be considered later. About 12,000 MW of gas-based power plants are in various stages of implementations and fuel would be allocated to them as and when they are ready.
The official said plants like those of ADAG would be considered for allocation of KG-D6 gas subject to availability i.E. Surplus production over and above what has been already allocated.
Gas produced by Gujarat State Petroleum Corp (GSPC) and Oil and Natural Gas Corp (ONGC) too would be considered for giving to firms like ADAG.
