Power and fertiliser to get natural gas on priority along with imports

Additional import of urea and natural gas is expected to be adopted as a viable path for allocation of natural gas on priority to both fertilizer and power. 

 

According to the officials close to the development, power and fertilizer both may be allotted priority gas out of domestic output at the empowered group of ministers (EGoM) on Monday.   

 

However additional gas may be procured through imports. Meanwhile the fertilizer ministry, according to sources, have been advised to submit how much of additional import of urea can be done. 

 

Otherwise, the ministry has been asked to suggest how much imported gas can be used for manufacturing of urea. In this way, a cost benefit analysis can be done  as to which will be the cheaper option- the subsidy on account of additional import of urea or import of additional gas used for urea production  which will be used for fertilizer and hence to be subsidized by the government. 

 

Meanwhile, the finance ministry is learnt to have agreed to bear the additional burden arising out of either import of urea or natural gas or both for priority allocation to core sectors- fertilizer and power.   

 

While the fertilizer ministry can decide to import additional urea or manufacture urea out of imported natural gas, the remaining domestic gas thus lying unused can be diverted to power sector.  

 

Sources said, import of urea is cheaper than manufacturing urea out of imported natural gas, but the decision has to balance the fate of domestic urea manufacturers which will run out of business if entire urea is to be imported. Currently 30 per cent of the total urea consumption in the domestic market is met through imports primarily from Oman, China, CIS and Iraq.  The fertilizer may decide to hike the amount of urea meant for agricultural use and domestic urea manufacturers may be asked to buy imported gas to manufacture mostly for industrial use. It is to be noted that urea used only for agriculture is subsidized by the government. 

 

According to officials, it has been in principle decided to allot natural gas on priority to power along with fertilizer since power sector has a multiplier effect on the entire economy. Currently, power plants are facing acute shortage of cheap fuel after a sharp decline in domestic gas. A change in gas allocation policy would give them fuel to generate about 2,200 mw from existing and stranded plants, officials said.

 

The three options for gas produced from blocks auctioned under New Exploration Licensing Policy (NELP) are either to: treat fertilizer and power sector customers equally or give equal priority to all core sector customers, including LPG and city gas or maintain status quo.