In what may lead to a serious face-off between two key ministries, the Fertiliser Ministry plans to red-flag the Power Ministry's request of seeking 9 mmscmd of gas from KG-D6 basin to fuel its stalled gas-based power plants, as it claims that the amount of natural resource sought by Shram Shakti Bhavan would produce only 1,600 mw of power across the country, whereas the move would significantly increase the subsidy burden on the fertiliser sector to up to Rs 10,000 crore, translating into financial burden on farmers.
Sources privy to the development told The Pioneer, that the Fertiliser Ministry has prepared a presentation which it aims to unveil before the empowered Group of Ministers (eGoM) led by Defence Minister A K Antony (formed to decide priority allotment of gas to the power sector), where it has clearly listed the financial and social implications of the Government's proposed move to prioritise the natural resource in favour of the power sector.
The eGoM has failed to meet twice over the last couple of weeks and sources said that though no date has been fixed as of now for the ministerial panel's meeting, it may not be easy for it to take a decision on the sensitive matter, considering the belligerent mood prevailing within the Fertiliser Ministry.
The major basis behind Fertiliser Ministry's opposition to the proposed move is that in the first place, gas output from the KG-D6 fields has fallen rapidly over the years and in such a scenario how can the Government prioritise the needs of the power sector over that of the fertiliser sector, especially when the needs of the farming community in an agrarian economy like India should be paramount.
The ministry has prepared its defence in response to Power Ministry's request to the Petroleum Ministry, seeking 9 mmscmd of gas from KG-D6 fields alone. In totality the Power Ministry requires around 100 mmscmd of gas for its total gas-based capacity of 26,000 mw.
Meanwhile informed sources also pointed out that while several power plants have sprung in all corners of the country and continue to do so, and there is no dearth of power generation, at the same a critical fact is that since 1999 no fertiliser unit has come up in the country.
According to the presentation prepared by the Fertiliser Ministry, it has said that the proposal of the Power Ministry seeking diversion of 9 mmscmd of gas from KG-D6 fields will have serious implications on the viability of the entire fertiliser sector, especially on the timely availability of fertiliser for the farmers.
It has further pointed out that there is no point in disturbing the present arrangement of gas allocation (where priority is given to the fertiliser sector) just for the sake of generating 1,600 mw of power, which the presentation says “is just a drop in the ocean”. Whereas at the same time thousands of mw of stranded capacity is lying unused in the country, the ministry has claimed.
More significantly in financial terms, the ministry has pointed out that the diversion of gas to the power sector, would result in an additional import of 4.75 million tonnes of urea and this would subsequently push up the international prices of urea substantially.
If these prices go up by $100 per metric million tonnes, the entire imported quantity of 11.15 million tonnes of urea (including the presently imported 6.4 million tonnes and the additional requirement of 4.75 million tonnes) would have to be procured at an enhanced cost of $420 per metric million tonnes.
This, the presentation added, would translate to a differential subsidy of Rs 9,683 crore on import of 11.15 million tonnes of urea, which would be much more compared to the present level of imports of 6.4 per million tonnes of urea.
The Fertiliser Ministry, sources said, is learnt to have been offered imported lNG in exchange of the 9 mmscmd of gas for the power sector by the Petroleum Ministry.
On this, the Srikant Jena-led ministry has countered that substitution of lNG with 9 mmscmd of gas would entail additional taxation as well as transportation tariff for it. Also the present approximate average delivered cost of KG-D6 gas is $6.50 per mmBtu for fertiliser plants, whereas the present delivered cost of lNG to fertiliser plants is in the range of $20 per mmBtu, thus making the proposition much more costlier for the fertiliser sector.