Following the discontinuation of subsidy to naphtha-based urea manufacturers from October 1, the Madras Fertilizers Ltd. (MFL) shut its urea plant on Wednesday.
MFL is the third plant in the South in the last one week to discontinue its operations. Mangalore Chemicals and Fertilizers Ltd. (MCFL) and Southern India Petrochemicals Ltd. (SPIC) have already shut down their urea operations. All these units together account for an annual production of 15 lakh tonnes of urea.
According to informed sources, the closure would lead to substantial import of urea at higher cost, result in loss of jobs to thousands of workers and make capital assets of these firms non-productive.
Besides, it would affect the profitability of Chennai Petroleum Corporation Ltd. (CPCL) which supplies 1,000 KL of naphtha a day each to MFL and SPIC. Indian Oil Corporation too will be hit as it provides LPG, diesel and furnace oil to these urea plants.
Talking to The Hindu, a senior MFL official said: “We have stopped procuring naphtha from CPCL since October 1. We have stopped production as we have run out of feedstock (naphtha). Currently, we have dead stock of naphtha of 2,400 KL. Our monthly expenditure towards procuring naphtha, furnace oil, diesel and LPG is around Rs.188 crore.”
He said that MFL had already seen maintenance closure during March-April 2014.
Both MFL and SPIC had written to CPCL asking it to stop supplying naphtha or at least supply it at reduced price.
“CPCL is totally dependent on MFL and SPIC to discharge naphtha. Following the closure, it has no choice but to export it at a lower rate. Besides, they cannot store it for a long period or use the entire quantity,” the official said. MFL has been making profikts for the last four years and had projected a revenue of Rs.80 crore for the current year. Due to the forced closure, the calculations would go for a toss, another official said.
