Steel cos may get a share of KG gas

Subhash Narayan

NEW DELHI: The government plans to allot natural gas from Reliance Industries’s Krishna Godavari (KG) basin to steel companies affected by the shortage of the commodity.

The empowered group of ministers (eGoM), scheduled to meet next month, will consider allocation of gas to Essar Steel, Ispat Industries and Vikram Ispat, which have either cut output or started using alternative fuels.

“The petroleum ministry has asked us to provide details of gas requirement of the steel sector so that this can be put up for fresh allocation of KG gas at the next meeting of the eGoM,” said a steel ministry official, who asked not to be named. Production has started at D6 block of the KG basin, and gas has already been allotted to fertiliser and power companies. India produces about 8.5 million tonnes of steel through natural gas-based sponge iron technology.

Due to fuel shortage, the plants are running at 75-80% of their installed capacity, causing a loss of over 1.5 million tonnes of steel production. In the case of sponge iron, the capacity utilisation is even lower at 50-55%.

The KG gas could immediately benefit Essar Steel, Ispat Industries and Vikram Ispat, which produce sponge iron used for making steel. While the gas requirement of these plants is 12.90 million metric standard cubic meter per day (mmscmd), allocation is 5.76 mmscmd. However, they get only 1.85 mmscmd of the allocated gas.

“We could never reach our rated capacity of 1.6 million tonnes of sponge iron due to low availability of gas. We had to switch to the blast furnace and scrap route for making steel. This also resulted in our costs going up,” said a spokesman for Ispat Industries.

Ispat has capacity to produce 3.4 million tonnes of steel and 1.6 million tonnes of sponge iron. Essar Steel has a capacity of 5.1 million tonnes of steel and 5 million tonnes of sponge iron. Vikram Ispat, which produces only sponge iron, has a capacity of 0.9 million tonnes. These three make 35% of the sponge iron produced in the country.

The balance is produced by 300-odd small sponge iron units, which use coal as fuel. Gas shortage has affected Essar Steel the most, as its facility at Hazira in Gujarat is solely dependent on gas. Vikram Ispat also uses LPG due to shortage of natural gas.