With fertiliser units in the country facing a major shortage of gas, the ministry of chemicals and fertilisers has asked the ministry of petroleum and natural gas to ensure that an adequate allocation of gas from the Reliance KG (Krishna-Godavari) blocks is kept for the fertiliser sector.

The department of fertilisers has asked the petroleum secretary to take up the issue with Reliance Industries Ltd (RIL), saying that the supply of gas to the fertiliser sector is necessary to meet current and future shortfalls.

RIL is developing two deep-sea gas fields in the KG basin off the coast of Kakinada in Andhra Pradesh and aims to produce 80 million standard cubic metres of gas a day (scmd) by mid-2008. The KG blocks will be an important source of gas, which will tide over shortages in the country, post 2008 (demand at 150 million scmd far outstrips the supply at 90 million scmd today). Industries like power and fertiliser, that are dependent on gas are operating at below capacity or using alternate fuels.

The communication from the department of fertilisers came after RIL invited price quotations from five fertiliser companies for sale of natural gas from the KG D6 block. In addition to the terms and conditions of the proposed supply, RIL has also provided a pricing formula to the fertiliser companies. The bid asked for three factors — the base price, service fee and an inflation factor.

The fertiliser ministry is concerned over the terms and conditions for the supply of gas, and pricing formula as suggested by RIL. Fertiliser companies have told the ministry that they cannot indicate a firm price to RIL without the approval of the ministry since fertiliser subsidy is dependent on the price of feedstock.

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