Urea plants using LNG from mkts may lose subsidy

The government is mulling stopping subsidy support to urea plants that use LNG imported from spot market as feedstock instead of using cheaper domestic gas available from state-owned ONGC.

Senior fertiliser ministry officials held discussions on gas usage with urea manufacturers and officials of GAIL and ONGC here.

According to sources, Oil and Natural Gas Corp (ONGC) has been forced to shut its one of the wells with capacity 8.67 million standard cubic meters per day as urea manufacturers are not offtaking the gas from it.

Government, they said, may stop paying subsidy to the urea manufacturers if they use imported LNG and spot gas as feedstock when domestic gas is available.However, urea players said that GAIL which sells gas produced by ONGC, has not coordinated properly.

More discussions will follow on the issue.

There are about 16 players in the fertiliser sector, with 30 manufacturing plants out of which 27 are on gas with demand of 31.5 million standard cubic meters of gas per day.

RIL also supplies 12-13 million standard cubic meters of gas a day to fertiliser units under the Gas sale purchase agreement (GSPA).

Meanwhile, on March 31 also urea manufacturers had an five-hour marathon meeting with RIL over the gas supply issue.

The two sides had failed to settle on the rate at which gas supplies should be securitised. But Reliance had agreed to continue to supply gas at $4.2 $4.2 per million British thermal units, till the company and fertiliser industry body FAI agrees on the new GSPA.

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