Indian govt to ask Reliance to prioritise gas sales
Sunday, 16 September 2007
NEW DELHI, Sep 15 (PTI): Within days of approving a price formula for gas to be produced by Reliance Industries, the government yesterday said it will ask the Mukesh Ambani company to prioritise fuel sales to fertiliser plants, city gas and existing power plants.
"Government is well within its right to fix sectoral priorities keeping in mind the overall national interest. The Empowered Group of Minister (EGOM) will in future meetings decide on which sectors should be given priority in allocation," Petroleum Secretary M.S. Srinivasan told PTI here.
The EGoM had September 12 approved a price of Rs.172.20 per million British thermal unit for RIL's KG-D6 gas. This was 8.32 percent lower than Rs.187.84 (USD4.33) per mBtu price proposed by RIL.
Srinivasan said the price approved by the EGoM will apply uniformly to all the sectors. "It should not matter to the producer (RIL) as to who uses the gas, as a uniform price will be charged from all."
"The guiding principle for gas allocation would be the Integrated Energy Policy drawn by the Planning Commission," he said, adding that fertiliser plants running below capacity and on expensive alternative fuels should be given the first right.
Projects to sell CNG to automobiles and existing power plants will be prioritised in that order.
He, however, said that the government will not allow trading in gas. "The policy clearly states that the gas should be sold to end users and so there is no scope for traders."
Government will examine all contracts to see they meet the policy parameter of "transparent, open, arms-length transaction between unrelated entities," he said.
Srinivasan said the approved price USD4.20 per mBtu will save Rs.30-40 billion annually in fertiliser subsidy as it will replace costlier naphtha (USD15.31 per mBtu), fuel oil (USD9.36 per mBtu) and LNG (USD7.91 per mBtu) that are currently being used in fertiliser plants.
Even Fertiliser Minister Ram Vilas Paswan in a letter to EGoM chairman and External Affairs Minister Pranab Mukherjee had admitted that at least Rs.30 billion would be saved in fertiliser subsidy at RIL's proposed gas price of USD4.33 per mBtu.
"Food security is of highest priority for the government and so fertiliser plants running below capacity in absence of sufficient feedstock, shut units and those running on expensive alternate fuels should be given the first right," Srinivasan said.
"Government is well within its right to fix sectoral priorities keeping in mind the overall national interest. The Empowered Group of Minister (EGOM) will in future meetings decide on which sectors should be given priority in allocation," Petroleum Secretary M.S. Srinivasan told PTI here.
The EGoM had September 12 approved a price of Rs.172.20 per million British thermal unit for RIL's KG-D6 gas. This was 8.32 percent lower than Rs.187.84 (USD4.33) per mBtu price proposed by RIL.
Srinivasan said the price approved by the EGoM will apply uniformly to all the sectors. "It should not matter to the producer (RIL) as to who uses the gas, as a uniform price will be charged from all."
"The guiding principle for gas allocation would be the Integrated Energy Policy drawn by the Planning Commission," he said, adding that fertiliser plants running below capacity and on expensive alternative fuels should be given the first right.
Projects to sell CNG to automobiles and existing power plants will be prioritised in that order.
He, however, said that the government will not allow trading in gas. "The policy clearly states that the gas should be sold to end users and so there is no scope for traders."
Government will examine all contracts to see they meet the policy parameter of "transparent, open, arms-length transaction between unrelated entities," he said.
Srinivasan said the approved price USD4.20 per mBtu will save Rs.30-40 billion annually in fertiliser subsidy as it will replace costlier naphtha (USD15.31 per mBtu), fuel oil (USD9.36 per mBtu) and LNG (USD7.91 per mBtu) that are currently being used in fertiliser plants.
Even Fertiliser Minister Ram Vilas Paswan in a letter to EGoM chairman and External Affairs Minister Pranab Mukherjee had admitted that at least Rs.30 billion would be saved in fertiliser subsidy at RIL's proposed gas price of USD4.33 per mBtu.
"Food security is of highest priority for the government and so fertiliser plants running below capacity in absence of sufficient feedstock, shut units and those running on expensive alternate fuels should be given the first right," Srinivasan said.