The Hindu : Business : KG gas supply: steel units to get priority

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Wednesday, Apr 29, 2009
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KG gas supply: steel units to get priority

Special Correspondent

Ministry asked to come out with details of requirement

Faced with a shortage of natural gas, companies have either slashed their output or were using other modes of production

NEW DELHI: Stating that the steel sector would get priority in the allocation of natural gas from the KG basin once the production crosses 40 mmscmd figure, the Petroleum and Natural Gas Ministry is learnt to have asked the Ministry of Steel to submit details regarding the quantity of gas required by steel companies as also their present source of allocation.

A decision to this effect has been taken by the Empowered Group of Ministers (EGoM) headed by the External Affairs Minister, Pranab Mukherjee, recently which has deliberated on pricing and commercial utilisation of gas under the New Exploration Licensing Policy.

Official sources said the Ministry of Steel had been asked to come out with details about the requirement for gas by the steel sector and also where they are now sourcing their energy requirements. The steel companies using natural gas as fuel for manufacturing iron and steel include Essar Steel, Ispat Industries and Vikram Ispat. The trio produce over eight million tonnes of steel annually through gas-based sponge iron technology.

Of the total earmarked quantity of 5.76 mmscmd, the three companies are understood to be getting 23.42 per cent of their gas requirement from Gas Authority of India Limited (GAIL).

Sources said that Ruias-led Essar Steel alone needs six mmscmd of gas, for which it has separate arrangements with GAIL and some other public sector oil companies. However, against an agreement for 3.1 mmscmd from GAIL, Essar Steel was now receiving only 20 per cent (0.66 mmscmd) of the earmarked quantity.

Ispat Industries too is getting only 40 per cent of its earmarked gas quantity. Similar is the case with Vikram Ispat. Faced with a shortage of natural gas, the companies had either slashed their output or were using other modes of production. The EGoM had accorded top priority to the power and fertilizer sectors in the allocation of gas from the initial output from the KG basin field of Reliance Industries Limited (RIL).

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