The government has approved the allocation of 40 per cent of the current output of natural gas from Reliance Industries' KG-D6 gas in the eastern offshore to the power sector even as RIL started supplying gas from its field to Nagarjuna Fertiliser Ltd, its nearest consumer.

To begin with, RIL will supply 0.5 million metric standard cubic metre per day (mmscmd) to Nagarjuna, which will be gradually increased to 1.549 mmscmd, Nagarjuna sources said.

The two plants of Nagarjuna, with a capacity to produce six lakh tonnes of urea each year, are just 60 km away from RIL's gas processing facility at Gagimoga near Kakinada.

An empowered group of ministers (EGoM), headed by external affairs minister Pranab Mukherjee approved allocation of 18 out of the initial 40 million cubic meters per day of gas output from KG-D6 for the power sector.

The EGoM will decide on the distribution of natural gas among individual firms later.

"An implementation committee, comprising officials of ministries of power and petroleum, will decide on which power plant will get what volume," a senior official said.

The EgoM has been set up to decide on gas utilisation policy, including sectoral allocation and the price of natural gas.

"Previously, the EGoM had decided that the gas from KG-D6 will have to first meet the fuel demand of urea making fertiliser plants. Thereafter, an implementation committee comprising official of ministries of petroleum and fertiliser chalked out plant-wise allocation, based on which Reliance and fertiliser companies sign gas sales and purchase agreement (GSPA) late last month," he said.

The EGoM also decided that any unutilised portion of the 5 mmcmd gas allocated for city gas projects will be given to existing gas-based power plants.