SPIC, Madras Fertilizers to re-start urea production

Centre allows naphtha as feedstock for limited period

In a breather to fertiliser manufacturer Southern Petrochemical Industries Corporation Ltd (SPIC), the Union Ministry of Chemicals and Fertilizers has informed that the company would be allowed to produce urea using feedstock naphtha for a limited period.

In a regulatory filing, the company said the ministry had informed they would be allowed to produce urea using naphtha for 100 days from the date of the notification, which is January 7, 2015.

"The company has, therefore, commenced starting up activities from today," it said, adding, it would inform the exchange immediately about the commencement of production. The production of urea in the company had been affected due to the central government's policy regarding the usage of the feedstock, naphtha, as fuel.

Meanwhile, Madras Fertilizers Ltd (MFL) in an announcement to exchange said the company had commenced the starting up activities for the urea plant from January 7, 2015, based on the notification dated January 7, 2015, received from the Department of Fertilizers, Ministry of Chemicals & Fertilizers to operate the urea plant for a period of 100 days.

It may be noted, the Centre had decided to discontinue subsidy for naphtha-based urea fertiliser plants from October 2014 till such time gas connectivity is provided to these two plants by the Government of India.

Tamil Nadu has two major fertiliser plants-one owned by SPIC, at Tuticorin, and another of Madras Fertilizers Ltd, Manali, near Chennai. The two plants had shut their operations from Oct 2014. SPIC and MFL have a production capacity of 620,000 tonnes and 475,000 tonnes of urea annually.

Towards the end of December, Tamil Nadu chief minister O Paneerselvam had said the state government was willing to forego the VAT component on naphtha, a move that may affect the exchequer to the extent of about Rs 90 crore while ensuring the jobs of hundreds of workers in the fertiliser plants in the state. The move was aimed at improving urea supply due to the resumption of operations of the two urea plants.

While announcing the decision, the company also said that oil marketing companies were charging an import parity price for naphtha supplied by them to the fertiliser units, and this was significantly higher than the price at which they exported the commodity. Hence, he suggested it would be fair for them to claim only the export parity price.

According to industry sources, the state government will now have to forego around Rs 50 crore in VAT from the operations of SPIC and Rs 40 crore from MFL.