 "Tamil Nadu govt asks Centre to continue subsidy for fertiliser plants for Urea")
The development comes at a time when Madras Fertilizer Ltd (MFL) and Southern Petrochemicals Industries Corporation (Spic) have shut operations at their urea plants as the Centre had decided to stop subsidies.
Both the plants have a combined capacity of one million tonnes per annum. Spic plant is located at Tuticorin while MFIL has its plant at Manali, near here.
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In a letter to the Prime Minister, Tamil Nadu chief minister O Panneerselvam said the closure of these plants would adversely affect the livelihood of hundreds of workers.
The chief minister said while the two plants had made necessary investments for gas conversion, the non-availability of gas and associated infrastructure makes it difficult for them to use gas as the feedstock.
He also said there would be an annual revenue loss of Rs 220 crore in the form of VAT, which is being paid by Spic and MFL. The cost differential between gas and naphtha would be negligible if oil marketing companies supply gas at the rate of export parity price instead of levying the import parity prices coupled with their margin.
He further said the move to import one million tonnes of urea additionally this year would not reduce subsidies.
In order to overcome any shortfall, the department of fertilisers had allotted mostly imported urea to Tamil Nadu for this season.
On the impact of the closure these plants, industry experts said it would not have an immediate impact considering that most of the state is facing drought conditions and 70 per cent of agriculture activities were over and kharif season was also over by September.
Besides, if the demand goes up, urea could always be imported, which is cheaper than that from the domestic market, they said. Industry sources said, while the maximum retail price for the farmer was around Rs 5,500 per tonne, the subsidy was around Rs 3,800 per tonne. They added that the cost of imported urea was $250-350 (around Rs 20,000) a tonne.
In 2013-14, of the around Rs 2,700 crore revenues for MFL, government's subsidy was Rs 2,300 crore, noted company officials of the urea units.
Earlier, the government had issued a direction to convert the existing facility to gas from naphtha before June 30, 2014, failing which the subsidy may be withdrawn. The deadline was extended up to September 30, 2014.