The Empowered Group of
Ministers (EGoM) on gas headed by Finance Minister Pranab Mukherjee is set to
meet later this month to decide on gas allocation to the steel sector. Steel manufacturers have intensified their
demand for restoration of gas supply from Reliance Industries' KG-D6 basin.
This
development comes days after a Task Force set up by the steel ministry
cautioned that curtailing gas supply to steel firms may push up input costs and
adversely impact downstream activities.
In its recent
report, the Task Force said that by de-classifying steel from the priority
sector, the government has triggered uncertainty among gas-based utilities like
Essar, JSW Ispat and Welspun Maxsteel, who need a minimum of 4.19 million
metric standard cubic metre (mmscmd) gas supply per day to ensure execution of
their targeted production.
The Task Force
said the petroleum ministry had initially allocated gas from the KG-D6 fields
to the sponge iron units of Essar, JSW and Welspun. However, an order on March
30, 2011 directed that supply be given on priority to core sectors first and
later to other sectors including steel. This resulted in the companies relying
on imports of re-gasified LNG, a costly, exercise, the panel said.
According to
the Plan Panel's Working Group, domestic natural gas is priced at $4.2-5.7 per
mmbtu as against $13-14 for imported LNG. The Task Force said that natural gas
for existing sponge iron units is crucial for their survival for there are no
other fuel substitutes.
Dilip Oommen,
CEO, Essar Steel said, “We have set up our plant based on gas supply which we
were assured. Now, mid-way we are being told that supply will be curtailed …
The only recourse left to us is importing RLNG, which is an extremely costly
exercise.”
Leave a Reply