Fate of naphtha-based urea plants hangs in balance

The Centre came out with a modified New Pricing Scheme III (NPS) and decided to stop paying subsidy after June 30.

June 30, 2014 10:15 pm | Updated November 16, 2021 07:24 pm IST - CHENNAI:

Naphtha-based urea manufacturers in the South such as Madras Fertilisers Ltd. (MFL), Mangalore Chemicals and Fertilisers Ltd (MC&F) and SPIC Tuticorin are keeping their fingers crossed as the Centre had directed the fertilizer producers to switchover to natural gas or else subsidy will not be given. Under the modified New Pricing Scheme III (NPS), June 30 was set as the deadline.

In April, the Centre came out with a modified NPS. Under the scheme, it was decided to pay special compensation to urea plants having completed 30 years and converted to gas and to phase out old and inefficient units after adding new capacities. It was also decided to stop paying subsidy after June 30.

According to sources, southern States require 60 lakh tonnes of urea annually, of which 30 lakh tonnes are met by MFL, MC&F and SPIC, the only producers of naphtha-based urea. These units are old and the cost of production is high because of the naphtha price.

Talking to The Hindu , MFL Chairman and Managing Director I. Vijayakumar said: “The deadline expired today. We cannot take risk and we are not going to stop production from Tuesday. Till now, we have not been asked to stop production. We hope we will get subsidy for some more time. We have written to the Department of Fertilisers for continuation of urea subsidy until gas is made available in the South.”

Conversion plans

While citing the efforts taken by MFL for conversion from naphtha to gas, he said that gas pipelines were laid by GAIL and ONGC. Following protest from the farmers, the laying of gas pipelines through farmlands was stalled in Tamil Nadu. The other alterative was to depend on IOC, which was laying gas pipeline up to Ennore Port. But, it would be ready only by 2017. Till then, MFL has to depend on naphtha.

“Today, we are producing 4.87 lakh tonnes of urea annually and about 1-1.5 lakh tonnes of NPK complex fertilizers. The cost of complex fertilizers of our competitors is less as they use gas. Even though our production cost of urea is around Rs.46,000 a tonne, we get fully reimbursed and hence MFL is not losing money. We are the only public sector unit in Tamil Nadu, and hence do not want to take chance,” he said.

For MFL, the urea plant is being operated at over 100 per cent load factor. For the NPK plant, ammonia is outsourced to the required level. At present, NPK production was on a low key due to financial constraints, he said.

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