The Cabinet Committee on Economic Affairs has decided to allow three plants in South India to manufacture urea using naphtha as a feedstock till gas is provided to these plants.

The three plants are Madras Fertilizers Ltd in Manali, Tamil Nadu; Mangalore Chemicals and Fertilizers in Mangaluru; and SPIC in Tuticorin. Production from these plants is expected to be 14.88 lakh tonnes annually as against a demand from the region of 22.5 lakh tonnes.

The move follows the government’s decision to provide imported natural gas pooled with domestic gas at a uniform price from July 1 to 27 urea manufacturing plants. The delivered price will be $10.5 a unit (gas is measured in million British thermal units), Chemicals and Fertilisers Minister Ananth Kumar said on Wednesday.

Production from the three naphtha-based plants was to be stopped after a decision by the UPA government forcing them to use only natural gas for production. However, lack of connectivity led to a stoppage in production.

Tax relief

Providing further relief to these plants, the two State governments have agreed to provide tax relief on naphtha.

“The state governments of Tamil Nadu and Karnataka have agreed not to charge VAT or entry tax on naphtha for the manufacture of urea,” said Kumar. “If these three units closed, then the entire requirement of the Southern region would have to be sourced through imports,” the minister added.

Kumar said that besides benefiting the farmers of the southern region, the move would also ensure that the 8,000-odd employees of the three plants continue to have employment.

Related Topics