Resumption of gas supply sought for Deepak Fertilisers

Deepak won't be able to supply a sufficient quantity of fertilisers to the Maharashtra govt without the gas

Faced with a shortage of NPK (nitrogen, phosphorus and potassium, respectively) fertilisers, the Maharashtra government has written to the Union government, seeking resumption of natural gas supply to Deepak Fertilisers. During April and May, just half the state’s demand for fertilisers was met.

On May 13, the Centre had ordered snapping gas supply from Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin to Deepak Fertilisers. Two days later, the company stopped receiving gas. Anticipating a supply cut, the company, on May 9, filed a writ petition in the high court here. It is likely the case will be taken up on Wednesday.

The Maharashtra government’s agriculture department said during the kharif season, the state required 150,000 tonnes of a particular grade of a complex fertiliser sold under the Mahapower brand. Deepak Fertilisers was asked to supply 44,400 tonnes but the company was able to meet only 52 per cent of the allotted quota between April 1 and May 15. Now, with the gas supply totally cut, the company won’t be able to supply a sufficient quantity of fertilisers, leading to shortage.

“Most of this product is sold in the Marathawada and Vidharbha regions, which are sensitive. We are constantly alert to the fact that instances of law-and-order disruptions, coupled with farmer suicides in the past few years, are unwanted events that have occurred in the cotton belts where this product is sold,” Sudhir Kumar Goel, additional chief secretary, Maharashtra, said in his letter to the secretaries in the petroleum, agriculture and fertiliser ministries at the Centre.

Goel suggested the issue price for supplying natural gas be dealt with separately.

On the petroleum ministry’s proposal to cut supply to P&K fertiliser units, an empowered group of ministers had, in February 2012, asked the fertiliser ministry to arrive at a recovery mechanism for such units within three months. Under the nutrient-based subsidy (NBS) scheme, the retail prices of P&K fertilisers aren’t regulated, while the subsidy on these is fixed. “There is no subsidy implication for the government and, therefore, cheap gas is only a windfall gain for the companies,” said an official.

When domestic natural gas from the KG-D6 field was allotted to Rashtriya Chemicals and Fertilizers and Gujarat State Fertilizers, besides Deepak Fertilisers, the NBS scheme wasn’t in place. Gas supply to Deepak Fertilisers was cut after the fertiliser ministry wrote to its petroleum counterpart, seeking immediate stoppage of 0.5 million standard cubic metres of gas a day. The company protested against the decision. Officials, however, said it could easily buy imported re-gasified liquefied natural gas from GAIL, as it was well connected to the gas pipeline network.

Largely, the fertiliser sector enjoys priority in domestic gas allocation from the KG-D6 field, as the government subsidises urea manufacturers for the cost of production. Unlike P&K, the NBS scheme has not been introduced in the urea segment, which continues to account for the largest chunk of fertiliser use in the country. The government has decided to continue gas supply to the other two P&K producers and offer them a recovery package, under which they will pay the government extra gains from the use of cheap priority gas.