Fertiliser firms have opposed a move to change the pecking order of allocation of natural gas, saying putting them behind LPG plants, CNG companies and petrochemical firms will increase subsidy burden.
The Fertiliser Association of India (FAI) has written to the government saying urea and crop nutrient manufacturing plants are getting only 60 per cent of their gas requirement from domestic sources and the balance is met through imports.
"By change of priority in allocation of gas, allocation of gas to the fertiliser industry may be reduced substantially. Diversion of even one million standard cubic meters per day of gas from the fertiliser sector and its substitution by (imported) LNG will increase the fertiliser subsidy by Rs 500-800 crores," it wrote.
The fertiliser sector currently enjoys top priority in receipt of domestically produced natural gas. According to FAI, there is a move to downgrade this by putting LPG producing plants, CNG supplying companies and petrochemicals firms higher in the pecking order.
The additional subsidy outgo on this account would also be shown as subsidy to Indian agriculture and farmers, it said.
FAI said there should be no differential between urea and other fertiliser plants (NP/NPK) for according priority in allocation of domestic gas.
India is heavily dependent on imports to meet its requirement. Nitrogen, used in manufacture of fertilisers, is also imported. About 40 per cent of domestic production of nitrogen is also dependent on imported gas (LNG).
"Any loss of production of NP/NPK fertilisers due to non-availability of domestic gas will further increase the import dependence of the country.
"India as a country should strive to increase self sufficiency in production of fertilisers. Therefore, it is absolutely essential that priority of both urea and NP/NPK fertilisers should be maintained," FAI wrote.
The association, which represents almost all fertiliser units in the country, said urea plants are facing problem due to supply of lean gas.
"This creates shortfall of carbon dioxide which in turn means that a unit has to either burn synthetic gas or recover carbon dioxide from furnace exhaust gas. In both instances, there is penalty in terms of higher energy consumption per tonne urea," it said.
Giving city gas sector higher priority than fertiliser would mean transferring the subsidy to affluent city consumers from agriculture and farmers, it said.
"Moreover, the change in priority in allocation of domestic gas will make the process of bringing reforms in fertiliser and agriculture sectors so much more difficult due to very high level of subsidy on fertilisers," FAI said.
It demanded that there should be no change in priority in gas allocation with fertiliser sector continuing to get top priority in receipt of domestic gas with the sole exception of court orders and strategic reasons.
