Differences have surfaced between the ministries of fertilisers and petroleum on supply of cheaper domestic natural gas to non-urea producing fertiliser companies — Rashtriya Chemicals and Fertilisers, Deepak Fertiliser and Gujarat State Fertiliser Company.
The fertilisers ministry, in a response to the petroleum ministry’s proposal to cut KG-D6 gas supply to the companies, has proposed a separate mechanism to recover any differential arising as a consequence of natural gas in the case of non-urea fertiliser.
The fertilisers ministry apprehends that if domestic gas is not available to phosphorus and potassium plants, the plants will have to use spot-imported gas at $18 per million British thermal unit. This will lead to high prices and, therefore, plant closures.
It suggested that the petroleum ministry continue allocation of domestic gas to fertiliser plants even if they are producing non-urea grades.
The petroleum ministry had argued for the suspension of supply of cheaper domestic gas to units manufacturing phosphorus and potassium, as they “are making undue profits”.
The fertilisers ministry has requested that domestic gas be first given towards replacement of the imported regassified liquefied natural gas.
The empowered group of ministers on gas allocation, headed by finance minister Pranab Mukherjee, is scheduled to meet later this week.
According to the ministry, every $1 reduction in price of a unit of gas can lead to annual subsidy saving of Rs 120 crore for a 1.2-million-tonne plant.
In the case of the two fertilisers, the subsidy is capped and cheaper input gas does not reduce the subsidy burden of the government.
The fertilisers ministry has pointed out that prices of urea and government subsidy will increase due to high cost of inputs -- like imported gas. The ministry has sought allocation of 24.2 million standard cubic metres of gas per day on a firm basis for setting up of seven expansion, two greenfield and revival of two closed units.
The government’s gas utilisation policy has accorded highest priority to fertiliser in the allocation of domestic gas. The fertiliser sector is still using 7 million standard cubic metres of imported gas.
