Gas policy to favour fertilisers

India’s draft natural gas utilisation policy is expected to prioritise the requirements of the fertiliser sector over petrochemicals.

The enormous volumes of gas generated from the fields of the east coast and west coast India would be first given to the fertiliser sector as some units are running below capacity because of shortage of feedstock.

The good news is that after fertilisers, petrochemicals will be favoured as the government believes that the industry has the capacity to absorb higher gas prices. This view is questionable. After all any Indian company would have to compete with players from the Middle East where gas prices are mostly below $3/mmbtu.

LPG fractionators would be given the same priority as petrochemicals. And these would be followed by city gas projects and new gas-based power projects.

The gas consumption numbers for 2004-05 show that 69% of gas produced locally (30,447 mmscmd) was consumed by the power sector. The fertiliser and petrochemical sector accounted for 26.5% and 4% respectively.

The numbers are likely to change in the coming years as gas availability will substantially improve. Here is an estimate on the growth in gas supply.

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