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Vijay Mallya-controlled Mangalore Chemicals & Fertilizers Limited (MCF) has asked the Centre to continue with its subsidy policy on naphtha-based fertiliser plants till such time that the Gas Authority of India (GAIL) starts the supply of gas to its fertiliser plant at Mangalore.
The company has invested Rs 300 crore to set up infrastructure at its plant to receive gas. However, the gas pipeline is yet to be completed and commissioned up to Mangalore by GAIL, said Vijay Mallya, chairman, MCF.
“We are absolutely ready with the infrastructure to receive gas at Mangalore. The Gas Authority of India is late in providing gas connectivity to Mangalore. This was promised to us, based on which we have made the investment. But, it seems the gas connectivity will be at least two years late,” Mallya told reporters after the 47th annual general meeting of MCF.
MCF has asked the government to continue with the subsidy policy for its naphtha-based plant until GAIL starts the supply of gas.
Stage-III of the New Pricing Scheme (NPS) for urea announced in March 2007 stipulated that the existing naphtha/furnace oil / LSHS units should convert to gas by March 31, 2010. Due to the delay in laying of pipeline and inadequate gas pipeline network in South India, the government had extended this deadline. Subsequently, in its notification issued on April 2, 2014, the government specified that production of high cost naphtha-based urea units will continue under modified NPS-III till the gas availability and connectivity is provided to these units or June 2014, whichever is earlier. Beyond this, subsidy for naphtha-based plants will not be paid.
MCF had signed a gas supply agreement with the Indian Oil Corporation and a gas transmission agreement with GAIL (India) Limited in 2011. The LNG terminal at Kochi was commissioned in September 2013. However, the laying of the gas pipeline from Kochi to Mangalore by GAIL is making slow progress. The gas delivery at Mangalore is expected in 2016-17.
Mallya said, the absence of a comprehensive fertiliser policy was affecting the industry and there was no clarity on several issues. “We are all eagerly awaiting a comprehensive fertiliser policy that will provide clarity going forward. It will enable fertiliser companies to plan their business for the future including expansion and I think that it will certainty help the fertiliser industry enormously.”
Stating that fertiliser is crucial for the domestic agricultural economy, he said, the country was facing a shortage of fertiliser and it will be in the best interest of the industry if domestic companies ramped up their production with further investment. However, the companies are unable to do it due to the clear absence of a policy, he added.
The unusual delay in subsidy payment by the Government of India contributed to working capital shortage, resulting in lower imports than the market demand. Although the company has the potential for increasing its sales, its capacity is limited by the availability of the working capital facility from its existing bankers, MCF said in its annual report.
