Govt invokes Essential Commodities Act to regulate supply of natural gas amid LPG shortage

The Union government on Tuesday invoked the Essential Commodities Act, 1955, amid growing calls from hotel associations across India to regulate LPG supply.

The government issued a notification in this regard to regulate the availability, supply and equitable distribution of petroleum and petroleum products and natural gas. The government has directed refineries and petrochemical units to maximise production of liquefied petroleum gas (LPG) and divert key hydrocarbon streams to the LPG pool.

"The Central Government has assessed that the ongoing conflict in the Middle East has resulted in the disruption of liquefied natural gas shipments through the Strait of Hormuz and suppliers have invoked force majeure clause which would entail diversion of natural gas to the priority sectors," the notification read.

The petroleum and petroleum products are covered under entry 5 of the Schedule of the Essential Commodities Act, 1955.

"The Central Government is conferred with the power under section 3 of the Essential Commodities Act, 1955, to regulate, inter alia, the supply and distribution of petroleum and petroleum products, as well as trade and commerce relating to the same, if it is of the opinion that it is necessary or expedient to do so for maintaining or increasing supplies of petroleum and petroleum product or for securing their equitable distribution," it added.

According to the order, the supply of natural gas to the certain sectors shall be treated as priority allocation and shall be maintained subject to operational availability to hundred per cent of their average past six-month average gas consumption. These sectors include: Domestic Piped Natural Gas supply; Compressed Natural Gas for transport; LPG production including LPG shrinkage requirements; Pipeline compressor fuel and other essential pipeline operational requirements.

The order further states that supply of natural gas to the fertilizer plants shall ensure seventy per cent. of their past six-month average gas consumption, subject to operational availability. It has also asked gas marketing entities to ensure that gas supply to tea industries, manufacturing and other industrial consumers supplied through the national gas grid is maintained at eighty per cent. of their past six-month average gas consumption subject to operational availability.

All City Gas Distribution entities have been asked to ensure that industrial and commercial consumers supplied through their networks receive eighty per cent. of their past six-month average gas consumption subject to operational availability.

The oil refining companies have been ordered to absorb the impact of LNG supply disruption to the extent feasible by reducing gas allocation to refineries to approximately sixty-five per cent. of the past six-month gas consumption, subject to operational feasibility.

Every producer, importer, transporter, marketer or distributor of natural gas including LNG and regasified LNG has been asked to furnish information relating to production, imports, stocks, allocation, supply and consumption to the Central Government or to any officer authorised by it.