Narendra Modi's Washington test

Narendra Modi's Washington test

If Modi gets the world’s biggest power right, his pursuit of larger global goals...
Small banks or banks for ‘small’ people?

Small banks or banks for ‘small’ people?

Unless appropriate sub-limits are imposed on loans, there is a serious...

GAIL quotes $21 for RLNG to fert units

May 14 2013, 01:33 IST
Comments 0
SummaryThe fertiliser industry has got a taste of how the gas market is evolving.

Buying GAIL feedstock may push cos into sickness

The fertiliser industry has got a taste of how the gas market is evolving. Forget the price of over $8.5 per mmBtu for domestic natural gas recommended by the C Rangarajan committee, public-sector GAIL India is understood to have quoted a hefty $21 per mmBtu for supplying regasified liquefied natural gas (RLNG) to fertiliser units. The price quoted by the gas marketer is 50% higher than $14, the price up to which the government subsidy would come to the fertiliser industry’s rescue.

So buying the feedstock at GAIL India’s price could push the fertiliser units into sickness. Alternatively, they could idle the new capacities. At a price of $21 for gas, the cost of producing urea, the most consumed fertiliser in the country, is expected to shoot up to over $590 per tonne, which is almost twice the current price of the fertiliser.

In the new fertiliser investment policy cleared by the Cabinet Committee on Economic Affairs (CCEA) on December 14, the government restricted subsidy for fertiliser units on a gas price up to $14 per mmBtu and said that any fuel price increase thereafter would have to be met by the producers.

Speaking to FE, IFFCO managing director US Awasthi said: “GAIL has quoted $21 per mmBtu for the supply of RLNG. This is too steep. We have approached the ministry of fertilisers several times on this matter but they are yet to revert.”

On its part, GAIL India defended its pricing. “We have offered them (IFFCO) the best competitive price in the country. We have sent our proposals to many fertiliser companies and also to the ministry,” Prabhat Singh, director (marketing), GAIL India, told FE.

A back-of-the-envelope calculation, however, shows that exclusive of GAIL's margins, imported liquefied natural gas could be taken to the end user at $15-16/mmBtu. Of course, the price would vary depending on the sourcing of LNG. LNG comes to Indian ports at $11-12/mmBtu, on which customs duty (5% only for fertiliser end use), regasification charges (around 65 cents), transportation charges ($1-1.50), shipping and insurance (26 cents) and some other charges are added, said a senior analyst with ICICI Securities.

As regards LNG, while the price of LNG imported under term contracts is governed by the special purchase agreement between the seller and the buyer, spot cargoes are purchased on mutually agreed commercial terms.

"This would take the urea price to

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...