Cap on gas supply casts shadow on expansion of urea projects

Govt had invited applications for setting up of new urea plants in Jan and had shortlisted four proposals early this financial year

The decision of an empowered group of ministers (EGoM) to put a cap on domestic gas supply to fertiliser companies has cast a shadow on the future of 10-million-tonne (mt) urea projects.

The EGoM, headed by Defence Minister A K Antony, had decided to put a cap of 31 million standard cubic metres a day (mscmd)on domestic gas supply to the fertiliser sector.

It had decided during 2013-14, 2014-15 and 2015-16, all additional domestic gas would be allotted to the power sector to help improve generation. To decide on the supply of additional domestic gas from 2016-17, the EGoM would review the gas production scenario after 2015-16.

“For existing facilities, the supply of 31 mscmd would be enough, but the decision would have implications on the future of the expansion plans of the industry. For instance, this would cast a shadow on the new urea facilities of about 10 mt, with an investment of about Rs 25,000 crore, expected to come up by 2015-16,” said Satish Chander, director general, Fertiliser Association of India.

“The problem would arise for coming fertiliser units alone, as we have to allocate some gas to the power sector, too,” said a senior petroleum ministry official.

In January, the government had invited applications to set up new urea plants; subsequently, it had shortlisted four proposals. The move was aimed at reducing the country’s dependency on urea imports. Currently, domestic urea production stands at about 22 mt. About eight mt are imported, and this is adding to the country’s import bill.

There are 39 gas-based power projects, with a capacity of 16,374 Mw and running at a plant load factor of 24 per cent, owing to shortage of domestic gas. Also, 13 projects, with a capacity of 7,815 Mw, ready for commissioning are lying idle because of no gas allocation. Against the requirement of 102.61 mscmd of gas, the current domestic gas.