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Fund to help naphtha-based fertiliser units upgrade

Our Bureau

CHENNAI, Aug. 28

THE Centre is considering setting up a one-time fund to help naphtha-based fertiliser units to modernise and convert to natural gas, according to the Union Minister for Chemicals and Fertilisers, Mr. Suresh P. Prabhu.

Addressing a seminar on ``Indian fertiliser industry: Vision for the new millennium'' here today, he said that the new fertiliser policy envisaged a uniform indicative price and related subsidy levels. While the new policy does not aim to eliminate subsi dy, the industry can expect rationalisation, he said.

The naphtha-based units will have to shift to more cost-effective and preferred feedstocks like natural gas/liquefied natural gas. The cut in subsidy is dictated by fiscal constraints rather than any obligation to the WTO regime, he said.

With the quantitative restrictions to be lifted in April 2001, the Indian industry will have to gird itself to face international competition, and upgrade. As an option, joint ventures to put up gas-based production facilities overseas may also be consid ered. The Government would interact with the industry to formulate a policy to encourage this, he said.

Mr. Prabhu said that the Government was also looking at ways to restart sick units. A brown field policy aimed at revival of such units is on the anvil. Task forces have been set up to study and tackle WTO related aspects, to look at coal as a feedstock for fertiliser units and to carry out a reassessment of capacities, he said.

Mr. A.V. Gokak, Secretary, Union Fertiliser Department, said it was inevitable for naphtha-based units to shift to other feedstock. While these were in for a hard time, the Government was willing to provide support during the period of transition. But in dustry will have to take the initiative without any goading from the Government.

While the Government is willing to consider appropriate tariff walls, prices will broadly have to conform to competitive levels. While the Government was appraised of the disadvantages of imports, this cannot be an argument for continuing high subsidy le vels. It will strive to achieve a judicious mix of imports and indigenous production, he said.

Mr. A.C. Muthiah, Chairman, SPIC, called for a long term subsidy policy and appropriate implementation to enable manufacturers to plan operations. With the increasing cost of feedstock and power, there is a need to refix norms. The concept of allowing fo r a post tax return of 12 per cent at normative operating costs is not valid. The retention pricing scheme does not reflect the ground realities, he said.

A partial closure of available capacities to meet WTO obligations is not a solution, but the country should look at measures to improve viability of such units. The problem of high input costs should be tackled, he said.

The prices of DAP have been fixed at unremunerative levels. Therefore, no fresh contracts have been finalised and availability could be a problem. This could result in imbalance in usage, he said.

Pic.: The Union Minister for Fertilisers and Chemicals, Mr. Suresh Prabhu (right), and the SPIC Chairman, Mr. A.C. Muthiah, at a seminar on fertiliser industry's vision in Chennai on Monday.

Pic. credit: Shaju John