MCFL shuts urea plant as govt permission expires

Fertiliser firm MCFL today shut its urea plant due to expiry of permission given by the government for production of farm nutrient from high cost feedstock naptha.
"... Our urea plant has been shut from October 1. The company will inform the stock exchanges of any further development," MCFL said in a filing.
Last month on August 27, government had approved the continuation of production of urea from three plants, including MCFL plant, using naptha as feedstock for a duration of three months till September 30.
As per the modified NPS III urea policy, on the basis of which cost of production of urea is calculated, the high cost naphtha-based urea units namely SPIC Tuticorn, MFL Manali and MCFL were allowed to continoue the production of urea till the gas availability and connectivity provided or June 2014 whichever is earlier, beyond which subsidy to these plants will not be paid.

Meanwhile, according to sources, the Fertilizer Ministry has circulted a cabinet note for giving further extension to these units to continoue production but the subsidy will be paid on the basis of cost of imported gas not on naptha.
Sources also added that further extension to these plants at the moment seems difficult as it will result in additional subsidy burden.

During the year 2013-14, the cost of production of per tonne of urea from each of these units was more than Rs 43,000, while in case of units using domestic gas as feedstock the price hovers in between Rs 10,000-Rs 18,000 per tonne.

The retail price of urea is fixed at Rs 5,360 per tonne.
Also, the company has been forced to shut down the plant on the same day, when the open offer of both Deepak Fertilisers and Zuari Group for acquiring 26 per cent stake in Mangalore Chemicals has started.
The company has capacity to manufacture 3,80,000 tonnes of urea and 2,56,000 tonnes of complex fertilisers annually.