Fertilisers and Chemicals Travancore Limited (FACT), which has drawn up plans for a Rs. 1,200-crore urea plant, can take heart from the announcement in the Union Budget 2014-15 that a new urea policy is in the offing.
FACT has proposed urea plant on its Udyogamandal complex. The plant is part of the medium term plans drawn up by the management and involves a total investment of Rs. 1,680 crore.
The company has drawn up the medium and long-term plans as part of a blueprint for long-term sustainable growth as advised by the Union Ministry of Fertilisers and Chemicals. However, industry sources pointed out that until the urea policy was out, it would not be possible to state how it would help producers such as FACT.
They pointed out that the urea investment policy, approved by the Cabinet in December 2012, had not achieved its stated goals of actually increasing production. One of the key factors in this regard is the cost of natural gas, which accounts for the bulk of the cost of production of urea. Though the Union Department of Fertilisers has given some indication that it would provide compensation for gas price, the Budget has not mentioned anything in this regard.
The success of the new proposal also will hinge on the price of natural gas. The availability and price of natural gas has been one of the key concerns of the fertiliser company for a while now. The Directors’ Report for 2012-13 had pointed out that non-availability of natural gas, high prices of RLNG (re-gassified natural gas) and a lack of level playing field were the major threats to the company’s profitability.
FACT now receives natural gas at US$23.5 per mmBtu. The price issue is likely to be looked into. At the same time, gas price has varied among different fertilizer companies, with some getting the fuel at US$4.2 per mmBtu and others at US$8.2 per mmBtu.
