Naphtha worries for Madras Fert

Madras Fertilisers' inventory of naphtha is down to two days, after which it might have to stop production if the ongoing differences with Chennai Petroleum on the purchase terms for naphtha are not resolved.

Sukumar N Oommen, chairman and managing director, Madras Fertilisers, said that Chennai Petroleum (CPCL) has not changed its decision to sell naphtha on a cash-and-carry basis as against the earlier system of credit for 50 per cent of the purchase. Madras Fertilisers does not have the financial strength to buy naphtha on a cash-and-carry basis.

The current situation follows an increase in Madras Fertilisers' outstandings to CPCL. Its dues on account of naphtha- a feedstock for its production of fertilisers- stood at Rs 189 crore.

The government owes Madras Fertilisers more than Rs 200 crore as subsidy on urea and for an increase in price of raw materials.

Oommen told Business Standard that the Department of Fertilisers had written to the chairman of Indian Oil Corporation, CPCL's main shareholder, that the problem was not of Madras Fertilisers doing.

The Department added that the credit arrangements on purchase of naphtha must continue. An union official in the public sector Madras Fertilisers said that the union had written to the Petroleum Minister explaining the background to the issue.

He added that the union plans to approach local members of parliament to help the company.

Ironically, a reason that led to the establishment of Madras Fertilisers was the need to find a downstream consumer for CPCL's naphtha output. Both companies have plants that are located in North Chennai.