City gas projects may get top priority in new allocation policy

In a major revision of India's natural gas allocation policy, the government is likely to give top priority to city gas projects selling compressed natural gas (CNG) to automobiles and piping it to households as cooking gas.

Under the policy of the previous UPA government, urea-based fertiliser plants get first right over domestically produced gas, followed by liquefied petroleum gas (LPG) plants and power stations. City gas distribution (CGD) projects are fourth in the priority list at present.

This priority list is now being changed to give CGD firms like Delhi's Indraprastha Gas Ltd (IGL), which sells CNG to automobiles and piped gas to households, top priority, according to reports citing petroleum ministry officials.

CGD firms like IGL currently get 8.32 million standard cubic meters per day of gas out of total domestic supplies of about 77 mmscmd.

As city gas projects are rolled out in newer cities, the requirement of the sector will grow and so the government is now giving it top priority.

Compressed natural gas (CNG) and piped natural gas (PNG) are clean fuels and will help replace subsidised diesel in automobiles and LPG in households respectively.

According to the new allocation policy being finalised, additional requirement for CGD will be first met by imposing proportionate cuts in the domestic gas presently being supplied to sectors other than priority sectors as decided by the Oil Ministry.

Plants providing inputs to strategic sectors of atomic energy and space research will get the second priority, followed by plants that can extract higher fractions from natural gas.

Gas-based urea plants will rank fourth in the priority list and power stations fifth.

Since domestic gas production is now stagnant, it is being proposed to freeze allocation to all sectors expect CND and LPG sector, at supply levels of 2013-14.

In 2013-14, fertilizer plants received 29.79 mmscmd of gas. Power plants got 25.59 mmscmd while LPG extraction plants received 1.83 mmscmd. Petrochemical plants received 3.32 mmscmd while refineries got 1.89 mmscmd and steel plants 1.32 mmscmd.

Sources said incremental production from NELP blocks like KG-D6 and Gujarat State Petroleum Corp's (GSPC) Deendayal gas will be allocated as per the decision taken in the meeting of an Empowered Group of Ministers (EGoM) on August 23, 2013.

The EGoM had decided that incremental gas would go to power plants.

Since the BJP government has wound-up the EGoM on gas pricing and allocation, the new priority list is being vetted by a Committee of Secretaries (CoS) and a finl order is likely to be issued shortly, the sources added.