‘CLOSURE OF THREE UREA PLANTS – MCF, SPIC AND MFL”

FAI Transparent APRIL 2014

THE FERTILISER ASSOCIATION OF INDIA SHARES THEIR VIEWS ON

‘CLOSURE OF THREE UREA PLANTS – MCF, SPIC AND MFL”

 

 

New Delhi, 28 August 2014: According to FAI, Honorable Prime Minister strongly advocated for growth of manufacturing sector and emphasized on ‘Make in India’ products in his Independence Day speech. However government at the same time is taking steps to close down present efficient manufacturing facilities. The case refers to proposed closure of three urea plants (MCF, SPIC and MFL) located in Karnataka and Tamil Nadu. The GOI notified the Modified New Pricing Scheme on 2nd April, 2014 under which production for naphtha based units will be continued till gas availability/connectivity is provided or June 2014 whichever is earliest. It was proposed that no subsidy will be provided thereafter to naphtha based plants resulting in closure of these plants. Government has to take decision on fate of these plants.

 

In this context, FAI refers to New Pricing Scheme Stage –III for urea manufacturing units notified in 2007. The policy inter-alia directed the naphtha and fuel oil based plants to change to natural gas. The policy also envisaged a Committee headed by Petroleum Secretary for “facilitating the connectivity and supply gas to non-gas based units.” Both of these obligations should have happened simultaneously. While urea units have taken steps and made investment for conversion, government failed to provide connectivity and supply gas. Closure of these units will necessitate higher urea imports by 1.5 million tonnes, which will result higher prices for entire urea imports of more than 9 million tonnes. It will also result in loss of jobs and rendering the capital assets non-productive. Three southern states of India (Tamil Nadu, Kerala and Karnataka) will be completely devoid of production of this vital fertiliser.

 

Speaking about the issue, Mr Satish Chander, Director General, The Fertiliser Association of India said “It is ironic that government is contemplating to revive various sick and closed fertilizer units and simultaneously shutting down three efficient urea manufacturing units for no fault of their own. Also the difference in the cost of production of urea based on LNG and naphtha is not significant. More than one third of gas based urea production is based on imported LNG. Further, investment in revival of each plant will be almost Rs. 5000 crore. All the shutdown plants proposed to be revived have also to be provided gas pipeline connectivity.”

 

“FAI believes that three naphtha based urea units which are energy efficient and have very low fixed cost should be allowed operating till the gas supply is arranged. This will avoid large scale unemployment, increased dependence on imports and higher subsidy outgo on account of subsidy on imported urea.” He added.

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