Mumbai, Aug. 19: GAIL (India) Ltd and fertiliser companies are in a dispute over a gas price order of the ministry of petroleum and natural gas.

Fertiliser companies, with integrated chemical facilities, have expressed their inability to comply with the directive.

GAIL has also informed the ministry that it was unable to implement the order as the fertiliser units were not disclosing the amount of natural gas used in the production of chemicals.

According to the order issued in July last year, the fertiliser units, using gas at subsidised rates to manufacture both fertilisers and chemicals such as methanol, must pay a market price for the gas used for products other than fertilisers. Rashtriya Chemicals and Fertilisers and Deepak Fertilisers & Petrochemicals Corporation Ltd are two companies that will be affected.

Sources said the order could not be implemented for over a year as fertiliser companies were not cooperating with GAIL in disclosing the quantum of gas they use to make products other than fertilisers. GAIL had also sent several letters and reminders urging them to provide the relevant data.

The gas distribution company recently told the firms and the ministry that non-implementation of the order has resulted in a reduced revenue realisation to the gas pool account. It is believed that GAIL has informed the companies that it can initiate action against them. However, it could not be ascertained whether such a step has indeed been taken.

Supply constraint

The fertiliser companies have said that though they are not averse to paying the market price for gas used for products other than fertilisers, the move needs to be kept in abeyance till the difficulties faced by the industry are sorted out. One such problem is the availability of gas.

For the past few years, gas-based fertiliser plants have to deal with falling supplies. Compared with the total requirement of 33.01 million standard cubic metres per day (mmscmd) of gas for these units, the average supply during 2004-05 was around 24 mmscmd. In 2005-06, while the total requirement of gas was a little over 35 mmscmd, the actual supply was only 28.09 mmscmd. The shortage has resulted in many units operating below the installed capacity even as costs have risen as they have been forced to substitute naphtha for gas in some cases.

According to the fertiliser industry sources, there were other problems as well. The industry has integrated fertiliser and chemical operations, sharing various inputs and utilities.

The industry said gas allocation had, therefore, not been split among divisions and an integrated approach was always followed.

This means it is difficult for the units to ascertain the extent of gas used other than fertilisers, the sources said.