The rising cost of Liquefied Natural Gas (LNG) has forced public sector FACT to suspend production of ammonia using natural gas as feedstock. Instead, the company has decided to import the ammonia itself, which in its liquid form is an important raw material in the production of NPK (Nitrogen, Phosphorous and Potassium) class of fertilisers.
Company sources said since the cost of LNG has gone up to $24.35 a unit from the existing $21.5 per unit, it would be ideal to look at importing ammonia rather than producing it internally. Besides, a recent directive from Petronet LNG asking FACT to purchase the entire consignment of natural gas has also put the fertiliser company in a spot. According to officials, one full shipment is around 80 million cubic metres, but FACT requires only half that quantity to meet its production needs for two months.
The officials clarified that availing of the entire consignment would be a waste since the company will any have to shut its production units for annual maintenance during April and May. Taking into account all these factors, the officials said importing ammonia would be cheaper than depending on natural gas to produce the raw material, which is in turn used to produce fertilisers including Caprolactum and Factamphos, in the range of 70,000 to 80,000 tonnes a month.
FACT had, in fact, approached the State Government to defer the 14.42 per cent Value Added Tax levied on LNG for a period of five years. The company was hopeful of a favourable response, they said.
When contacted, R. K. Garg, Director, Finance, Petronet LNG, told Business Line that the company was not directly involved in the sale of natural gas to consumers and it was carried out by a consortium of GAIL, BPCL and IOC. PLL is selling the gas at spot rates and the current high price was due to rates prevailing in the global market, he said. The price of natural gas had moved up substantially due to higher demand for it during winter, and PLL had informed FACT about the possibility of higher gas prices two months in advance, he said.
On insisting that FACT take the full LNG cargo , he said FACT could always store the gas at the storage terminal in Puthuvypeen and use it for a period of four months. Moreover, if the company gives advance notice of its requirements for the whole year, he said supply could be suitably arranged at better rates .