Fertiliser firms fret over gas price

The ministry of chemicals and fertiliser has said the proposed increase in natural gas prices will turn petrochemical complexes into sick units.

It has also criticised the petroleum ministry's proposal for differential pricing for natural gas users.

The petroleum ministry had turned down the request for administered rates, stating that the prices of petrochemicals were market determined and not controlled by the government and therefore natural gas for petrochemical production could not be supplied at administered prices.

The ministry wants the sectors, whose output commodity price is not controlled by the government, to pay the market price for gas input costs.

It also wants to raise the price of natural gas for fertiliser to Rs 350 per million standard cubic meter (pmscm) and for the power sector to Rs 750 pmscm. For other consumers, including petrochemical producers, the government wants the price to be linked to international fuel oil prices.

The department of chemicals and petrochemicals said increasing gas prices, to bring it at par with the rates for the basket of fuel oil, would not be justified as petrochemical companies would have to pay about 300 per cent more. Such a move will put natural gas prices in the range of Rs 8,140 pmscm instead of the present Rs 2,850.

"It is possible that some of the complexes may turn sick as it would be difficult for them to absorb the hike," said the department. It said the sector was already under strain because of an increase in international crude oil prices.

While rejecting the argument, the petroleum ministry said petrochemicals were generally produced by cracking gas or naphtha, which was a decontrolled product and was available at market prices.