New Delhi, June 25: The government today outlined the utilisation mechanism for gas flowing from Reliance’s D-6 field in the Krishna-Godavari Basin, giving highest priority to existing gas-based urea plants.

Reliance will start pumping 25 million standard cubic metres of a day (mmscmd) of natural gas from September and the output will be raised to 40 mmscmd by March next year, the petroleum ministry said.

The empowered group has asked Reliance Industries to supply natural gas from its field first to fertiliser units and then to LPG plants. Existing power plants and city gas distribution units will be the last to get the Reliance gas.

The government decision could affect the gas demanded by Anil Ambani for Reliance Energy’s proposed 7,450MW power plant at Dadri in Uttar Pradesh. Anil has been fighting a legal battle with elder brother Mukesh on this gas supply issue.

The empowered group, headed by external affairs minister Pranab Mukherjee, was set up to examine issues relating to pricing and commercial utilisation of gas under the New Exploration and Licensing Policy (Nelp).

“All gas produced from areas awarded under Nelp would have to sell the fuel in accordance with the marketing priorities determined by the government,” the empowered group said.

The allotment policy will apply for the next five years. The companies “would sell gas from Nelp to consumers in accordance with the marketing priorities determined by the government and the sale would be on the basis of formula for determining the price as approved by the government,” a statement issued by the ministry said.

The empowered group had earlier approved the gas price at $4.20 per million metric British thermal unit (mmBtu) at delivery point. At the current exchange rate, this translates into a price of Rs 172.20 per mmBtu. The approved price is 8.32 per cent lower than $4.33 per mmBtu proposed by Reliance.

Arvind Mahajan, executive director of KPMG, said “The empowered group’s decision to first fix the gas price and then outline the utilisation mechanism appears to be aimed at controlling the subsidy bill. Under the old Nelp (KG-D-6 falls in that), the companies were given the right to determine the price and utility. The current decision appears to be going back on that and is against the concept of free market,” he said.