In the backdrop of increasing urea demand, which is likely to go up 5% annually, the fertiliser ministry has made a strong pitch for subsidised sale of gas to fertiliser companies.
The department of fertilisers (DoF) made a detailed presentation before the energy coordination committee (ECC) headed by the Prime Minister a few days ago. The department has asked for a delivered price of gas at $5 mmbtu for the sector.
DoF officials, in the presentation, said that the demand for urea was expected to increase to 38 million tonne by 2016-17 from 26 million tonne currently.
To meet this increasing demand, an additional 16 mmscmd gas will be needed, taking the overall demand of gas to 95.36 mmscmd from the present 27 mmscmd for the fertilizer sector.
Confirming the move, a senior DoF official told FE that with new investment policy in the offing, new indigenous production capacities can come up in future with above gas availability, provided the gas is available at reasonable price.
?The savings will be on account of lower capital cost, shipping freight and port handling which has been estimated at $20 per tonne each, respectively,? the official said adding ?there will also be a saving on internal transportation of urea depending upon the location of the plant?.
It has been estimated that $1 per one mmbtu increase in gas price will lead to an increase of $21 per tonne. It is, therefore, necessary that the gas price for the sector be fixed at a reasonable level, keeping in view the price at which fertiliser companies in the Middle East are sourcing gas. It may be noted that domestic units can absorb at the most a $2.5 per mmbtu difference in gas price between the prices in the Middle East and in India, on account of savings as indicated above.
