The Fertiliser Association of India has urged the Government to continue with subsidy for naphtha-based units till it ensures piped gas connectivity.
According to the Modified New Pricing Scheme notified by the Government on April 2, production of fertiliser at naphtha-based units will continue till gas availability/connectivity is provided or June 2014, whichever is the earliest.
While urea units have taken steps and made investment for conversion, the government has failed to provide gas supply connectivity, said the association.
Last week, the Government assured subsidy to the three naphtha-based urea plants of Mangalore Chemicals and Fertilizers, Southern Petrochemical Industries Corporation and Madras Fertilizers till September.
Providing a major relief to three fertiliser manufacturers in the South, the Cabinet Committee on Economic Affairs, on Wednesday, allowed them to produce urea using naphtha as feedstock.
Collectively, these firms so far have produced about 14 lakh tonnes of urea.
Subsidy bill Gas accounts for four-fifths of the cost of making urea, a nitrogenous fertiliser that consumes more than half of India’s annual fertiliser subsidy bill of $11 billion (about ₹66,000 crore).
The closure of these units would have led to higher import demand from India, pushing up urea prices in the global market and impacting India’s overall annual import of nine million tonnes.
Satish Chander, Director General, Fertiliser Association of India, said it is ironic that the government is contemplating to revive various sick and closed fertiliser units while making survival of efficient urea units difficult.
Interestingly, more than one third of gas-based urea production is based on imported LNG. Also, the difference in the cost of production of urea based on LNG and naphtha is not significant, he said.
Correction
This news report has been modified to delete a reference to Cairn. It said Cairn had got government permission to sell gas at a higher rate to Gujarat based firms. However, the company does not require government approval and there are 52 other pre-NELP production sharing contracts where the Government permission to hike gas prices is exempted.