Govt stops domestic natural gas supply to Deepak Fertilisers

Says it manufactures non-subsidised crop nutrients and as such should not get the cheaper fuel

Government has stopped supply of domestic natural gas to Deepak Fertilisers, saying it manufactures non-subsidised crop nutrients and as such should not get the cheaper fuel.

The Oil Ministry, acting on a request from the Department of Fertilizers, yesterday issued orders for immediate stoppage of 0.5 million standard cubic metres per day of domestic gas being supplied to the company.

"Department of Fertilizers vide letter dated May 1 has conveyed that maximum retail price for nitrogen phosphorus and potassium (NPK) fertilizers under Nutrient Based Subsidy (NBS) Scheme is free and the manufacturers of NPK can absorb the high cost of ammonia in the MRP, whereas the MRP of urea is fixed and statutorily controlled by the Government," it said.

Owing to the shortfall in the supply of domestic gas, the urea manufacturing units have to rely on exorbitantly high priced imported LNG, the cost of which the government has to bear in form of subsidy.

"Accordingly, the Department of Fertilizers has requested that the supply of gas to Deepak Fertilisers, which is exclusively manufacturing NPK fertilizers, should be stopped with immediate effect and the said quantity of domestic gas may be allocated/shifted to urea manufacturing units, which are facing shortfall in supply of domestic gas or using high priced LNG, preferably to National Fertilizers Ltd," it said.

The Ministry ordered that supply of all domestic gas including that of Reliance Industries' KG-D6 to Deepak Fertilisers "may be stopped with immediate effect."

"As an interim measure, this gas may be distributed to other existing urea manufacturing units that have shortfall in supply of domestic gas in proportion to their shortfall," the order said.

An Empowered Group of Ministers (EGoM) headed by the then Finance Minister Pranab Mukherjee had in early 2012 put on hold a proposal to suspend supply of KG-D6 gas to P&K plants of Deepak Fertilisers till May 24, 2012.

The Department of Fertilizers was asked to calculate the gains made by companies using KG-D6 gas in manufacture of fertilisers other than urea. The gain made in manufacture of P&K fertilizer using cheaper gas, was to be recovered from these units.

However, the Department of Fertilizers did not formulate the guidelines for the same and natural gas supplies to P&K plants continued for almost two years beyond the stipulation laid by the EGoM.

"Department of Fertilizers has not finalised the guidelines till date. About two years have elapsed since May 24, 2012, the time limit set by EGoM. Presently, Department of Fertilizers has requested to stop supply of domestic gas to Deepak Fertilisers," the Oil Ministry order said.