Alarm over gas shortage for fertiliser units

Fertiliser dept has asked PMO for an action plan on a priority basis.

In another evidence of how fluctuating gas prices and concerns over availability are affecting Indian industry, the fertiliser department has told the Prime Minister's Office that there is "complete uncertainty" over supply of gas to units for the next five to six years.

The fertiliser department has pointed out that the level of subsidy is already topping Rs 2,400 crore and if the problem is not resolved, it will have an adverse impact on investment decisions for adding capacity of five million tonnes of fertiliser production in the next five years.

As a consequence, Fertiliser Secretary Madhukar Gupta has requested the PMO for an action plan to address the problem on a priority basis, failing which there will be a much higher subsidy outgo for the sector.

In the current fiscal, the country has had to resort to substantial imports of fertilisers at prices higher than the government recognised average cost of production.

According to the department, while there has been a policy decision to switch over to gas, the industry is staring at a shortage of about 30 per cent in terms of gas availability even for the existing units. Due to shortage of gas, the fertiliser units had been relying on more expensive feedstock like naphtha and fuel oil which took care of nearly 35 per cent of their requirement.

As a result, the units depending on these fuels accounted for nearly 70 per cent of the subsidy outgo on urea. The fertiliser department, in its representation to the PMO, said naphtha and fuel oil had not only witnessed substantial price rise but had low efficiency and were harmful to the environment.

"The cost of the feedstock forms nearly 65-70 per cent of the cost of production and is responsible for the ever increasing subsidy outgo," the fertiliser ministry said.