AS Reliance Industries gets ready to market gas from its D6 block in the Krishna-Godavari basin, the Andhra Pradesh government has begun asserting its rights of first use. Andhra Pradesh Chief Minister YSR Reddy has written to Prime Minister Manmohan Singh, saying that gas from the K-G basin should be first given to the state for meeting its requirements in power generation, CNG, domestic gas and other industrial purposes.

This comes just a day after RIL arrived at a market determined price of $4.79 per million metric british thermal unit (btu) for the sale of K-G gas and submitted it to the Ministry of Petroleum and Natural Gas for approval. RIL’s price is based on quotes the company got from 10 fertilizer and power companies.

Earlier, Andhra’s energy department had also written to the Ministry, opposing the recommendations of the pricing committee on natural gas. On Friday, the pricing committee of the ministry announced the mechanism to determine the price of domestically produced gas, allowing producers to sell gas at a price determined through a competitive bidding process, something the state opposes.

The timing is also important since it comes ahead of the crucial Prime Minister’s energy coordination committee meeting, which is to be held this month-end and which will discuss the government’s gas pricing policy.

The Andhra government does not want pricing of gas to be left to market forces and has been lobbying for a regulatory body to decide the price. “The basic interest of the state government is to ensure that adequate gas required in the state is made available at reasonable rates. This, therefore, means that no portion of the gas from the K-G basin can go outside without first meeting the entire requirements of the state,” says an Andhra government note.

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