Cost pressure on fertiliser companies to increase if natural gas is not made available to them
October 20, 2009
Fertiliser companies are staring at heavy losses if they are denied natural gas from Reliance Industries. RIL is producing 40 million metric cubic metres per day (MMCMD) of natural gas. Anil Ambani has also made a claim of 28 MMCMD per day. NTPC has also claimed 12 MMCMD to run its 4,000 MW power project. That will leave fertiliser companies with no input from Reliance Industries.
Fertiliser companies having annual capacity of 7.5 million tonnes based on natural gas could be hit by a major crisis if they are not given natural gas, which is used as a fuel and raw material. On an average, about 950 to 1,000 cubic metres of gas is used for each tonne of fertiliser. Around 20% of natural gas is used as feedstock and 80% is used as a fuel.
In fact, the Government of India, in its policy decision, insists that fertiliser industry is the first priority for natural gas industry. According to Rashtriya Chemicals & Fertilisers (RCF), Mumbai, public sector fertiliser companies use 20 MMCMD of natural gas. On the question of what impact would be there if RCF is not given any gas allotment, RCF CEO, US Jha, refused to make any comment as this matter will be discussed in the Supreme Court.
Already eight fertiliser units are closed in Barauni, Sindri, Haldia, Gorakhpur, Talchar, Ramgundm, Korba and Durgapur. If gas is not made available to fertiliser companies, more units may see closure and that may in turn see sharp rise in fertiliser subsidies. Fertiliser subsidies were around Rs 46,000 crore in 2007-08 and are likely to cross Rs 1,00,000 crore this year.
In addition to natural gas, fertilisers can be made from heavy oil and coal. Heavy oil and coal options are very expensive as compared to natural gas. Heavy oil conversion to fertiliser plant will consume 30% more energy and coal conversion to fertiliser plant will consume 70% more energy. Investment cost in heavy oil and coal plants are also very expensive. Heavy oil plant is 40% more expensive and coal based plant is 140% more costly. Production cost as compared to the cost of natural gas is also very high. Heavy oil plant production cost of fertiliser is 20% more and for coal it is 70% . So if natural gas is not made available to fertiliser plants, cost pressure on other options will create huge losses to the country.