India offers subsidy to fertilizer producers for feedstock change

20 December 2012 06:19  [Source: ICIS news]

KOLKATA (ICIS)--The Indian government has approved subsidies to be disbursed to state-owned fertiliser producers in the process of switching feedstock from naphtha to natural gas, an official in Department of Chemicals and Fertilizers said on Thursday.

“The grant of subsidy would commence with Fertilizer and Chemicals of Travancore Limited (FACT) with $55m (€41m) till June 2013. The subsidies to Madras Fertilizer Limited (MFL) and Gujarat Narmada Valley Fertiliser and Chemicals Limited (GNVFC) will be finalized soon,” the official said.

“The additional funding was to enable the fertilizer producers bear the burden of higher production cost based on naphtha feedstock during the transition to natural gas which was expected to be complete by May 2013,” the official said.

While the amount of grant has been fixed in case of FACT, report on production cost structures of MFL and GNVCF and deadline for completion of conversion of feedstock projects had been sought based on which the subsidy amount would be disbursed within the next one to two months, the official added.

FACT, which operates two plants located near southern Indian port town of Kochi has undertaken a project to switch naphtha feedstock sources from refinery of Bharat Petroleum Corporation Limited (BPCL), situated in close proximity with liquefied natural gas from Petronet LNG’s 5m tonne/year terminal under construction in Kochi.

Earlier, this month, GAIL India completed the first phase of the pipeline connecting the LNG terminal to FACT plant and was ready for gas intake from LNG Petronet project scheduled for completion in first quarter of 2013, the official said.

FACT’s plants produce complex fertilisers, ammonium sulphate and caprolactum and small quantities of soda ash and nitric acid.

MFL was seeking natural gas feedstock from Krishna Godavari (KG) D6 basin operated by Reliance Industries.

But as a contingency, the fertilizer company was also negotiating for natural gas supplies from Indian Oil Corporation’s (IOC) LNG terminal under construction at Ennore port in southern India, the official said.

Currently, MFL’s plant located in Manali, 20 kms from Chennai produces 486,750 tonne of urea, at 100% capacity utilization based on naphtha feedstock.

($1 = €0.75)

By: Ajoy K Das
+65 6780 4359

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