Want of natural gas stalls Rs 21,000 cr investment in fertilizer plants

By admin December 29, 2009 8:46 am IST

“If these projects come up, which may take three to four years to complete, India would raise the urea production by 30 per cent to 260 lakh tons from the current 200 lakh tons.”

 
Over Rs 21,000 crore investment in six new fertilizer plants has been withheld due to  want of natural gas. The amount would have added to India’s urea making capacity by 30 per cent. Six companies – Iffco, Kribhco, Chambal Fertilizers & Chemicals, Tata Chemicals, Indo-Gulf Fertilizers and public sector Rashtriya Chemicals & Fertilizers — have submitted proposals for setting up new urea plants with 10 lakh tons capacity each. Reliance Industries’ eastern offshore KG-D6 gas field is capable of meeting the entire feedstock requirement of 13.2 mmscmd of these plants, but allocation has not been made. KG-D6 has a capacity to produce about 65 million standard cubic meters per day (mmscmd) of gas, but is generating below 40 mmscmd for want of government nominated buyers. An official said the government had previously given existing urea making plants top priority for receiving KG-D6 gas when first 40 mmscmd output was allotted. Fertilizer firms want the new plants to also enjoy the same priority. However, with the constitution of the Empowered Group of Ministers (EGoM) on gas, he said, the matter may be decided by a panel. According to the proposals, the six firms would need 2.2 mmscmd gas each, which can be supplied from RIL’s KG-D6 basin. But they want a commitment from the government that they would receive the required quantity of gas after they complete their projects. As per the proposals, the new brownfield plants would be set up near the same site where existing units are located, and each requires a capital investment of Rs 3,500-4,000 crore. The official said if these projects come up, which may take three to four years to complete, India would raise the urea production by 30 per cent to 260 lakh tons from the current 200 lakh tons. Since annual import at the current demand is about 60 lakh tons, there may be less dependence on overseas product even if urea requirement rises. Besides self-sufficiency, the government also hopes to reduce fertilizer subsidy with increased domestic production, as the government aid last year was over Rs 100,000 crore.