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Tuesday, Sep 15, 2009
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Business Daily from THE HINDU group of publications Tuesday, Sep 15, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Fertilisers Industry & Economy - Petroleum Uniform price sought for gas delivered to urea plants
Mr Atul Chaturvedi Our Bureau New Delhi, Sept. 14 The Fertiliser Ministry is seeking a uniform price for natural gas delivered to urea plants across the country. This, it says, would facilitate the proposed decontrol of urea prices. Currently, delivered gas prices to urea plants generally vary from $2/mBtu to $7.5/mBtu. The gas sold at controlled prices (so-called APM gas) is available at $2/mBtu. Gas from Reliance Industries-operated KG block is delivered between $5.5/mBtu and $6.5/mBtu, while going up to $7.5/mBtu if additionally transported through GAIL (India) Ltd’s pipeline network. Besides, urea plants also source re-gassified liquid natural gas (RLNG), the prices of which in the past have gone up as high as $20/mBtu. According to the Fertiliser Ministry, such wide feedstock price differentials would make any decontrol of urea prices unfeasible. The difference in manufacturing costs resulting from this would make urea way cheaper for farmers in Andhra Pradesh and Gujarat (the landfall States) than for those in Punjab, Haryana or Uttar Pradesh. In a letter to the Cabinet Secretary, Mr K.M. Chandrasekhar, the Fertiliser Secretary, Mr Atul Chaturvedi, sought a common pooled price of natural gas derived from different sources such as APM, imported R-LNG, and D6 gas. Further, “there is a need to review the existing transportation tariff policies with an aim to ensure that the tariffs are uniform and are function of volumes of gas transported across the natural gas grid…..and there is no specific advantage/disadvantage to the industry on account of its proximity/distance from the source of natural gas,” the letter said. The Ministry feels that once gas is made available to all urea units at a uniform price, it would be easy to decontrol the fertiliser. Currently, the maximum retail price of urea is fixed by the Centre at Rs 4,830 a tonne. Decontrolling prices without a common pooled price would result in making even efficient plants, located far away from landfall points, uncompetitive, according to the Ministry. Mr Chaturvedi’s letter has also expressed concern over the ‘abnormally high transportation cost’ of natural gas to northern and eastern India compared with coastal India. With transportation of gas from KG Basin to any plant beyond Jagdishpur (U.P.) estimated at more than $ 3/mBtu as opposed to less than $ 1/mBtu in and around Kakinada (A.P.), it would not be possible to set up gas-based fertiliser plants in Bihar, West Bengal, Orissa or Chhattisgarh, the letter adds. Nutrient cheaper in coastal States The tricky part in decontrolling urea prices in the current environment of differential feedstock costs is that it would make the nutrient cheaper in coastal States, where gas is available. But on the other hand, the States that produce a chunk of the country's agricultural produce - Uttar Pradesh, Bihar, Punjab, Haryana, and West Bengal - are located in the hinterland and far from any gas source. In the event of decontrol, urea prices here would obviously go up much more than in Gujarat or Andhra Pradesh. A common pooled gas price is expected to create a level-playing field for urea plants across the country, and compete on the basis of operational efficiencies rather than just feedstock cost differentials.Govt provides sops for fertiliser cos to switch to natural gas Switchover to gas helps urea units cut production costs RIL inks gas supply pacts with 12 fertiliser cos GAIL signs pact for gas supply to 4 fertiliser units More Stories on : Fertilisers | Petroleum
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