State-owned fertiliser major National Fertilizers (NFL) has told the government that it will be forced to shut down all its plants by October-end unless a subsidy amount of R2,000 crore is disbursed without any further delay.

In a letter to the fertiliser ministry dated September 18, the company has stated that the government should provide the pending subsidy without any further delay to avoid a shut down of its business operations by October-end.

Neeru Abrol, chairman and managing director of NFL said, ?We have informed the government about our dismal financial position. The subsidy has been pending for the last six months and the banks have also refused to fund us as they are facing a liquidity crunch.?

NFL has a working capital limit of of R1,200 crore annually which has already been exhausted, preventing banks from funding the PSU further. In the absence of a subsidy, NFL has no option but to shut operations.

NFL has two manufacturing plants each in Punjab and Madhya Pradesh, and one in Haryana with a combined capacity of 3.5-3.7 mtpa. The company?s three fuel oil-based units have converted to gas-based production at a cost of R4,066 crore. With this, all the five urea manufacturing units of the company have become gas-based units from 2013-14.

The NFL story is reminiscent of the problems being faced by several state-owned entities in the infrastructure space, particularly on account of shortage of gas and high cost of imported RLNG. Recently, Ratnagiri Power Project in Maharastra ? operated by NTPC ? had to shut down operations due to non availability of domestic gas. Several private sector power projects are also shut due to shortage of gas.

In July this fiscal, the government divested 7.64% equity in NFL. The issue was over-subscribed at 1.55 times and the government received around R101 crore towards divestment receipts. At present, the government holds 90% stake in the company. NFL reported a net loss of R77.03 crore for the first quarter ended 30 June, due to a decline in sales.

Recently, the fertiliser ministry had sought R12,000 crore under an SBA from the finance ministry to pay part of the subsidy bill to the industry which is facing a liquidity crunch.