Fertilizer sector: An updte

May 17: For reference purposes, the website carries here a comprehensive update on the fertilizer sector. The following information is carried on the update:
 8Organizational chart of the DOF
 8The mandate of the DOF
 8Details of the current fertilizer subsidy regime
 8Details of the Nutrient Based Subsidy regime
 8Likely subsidy per tonne of P&K fertilizers in 2012-13
 8Budget allocation and expenditure of the DOF
 8Disaggregated details of subsidy dispensed in the fertilizer sector between 2007-08 to 2011-12 and estimates for 2012-13
 8Details of policies on movement and distribution of fertilizers
 8Cumulative requirement, indigenous production, estimated imports and tentative availability of fertilizers in 2012-13.
 8Fertilizer manufactured by PSUs and their installed capacities (2006-07 to 2011-12)
 8Latest details on revival of FCI and HFC
 8Details of joint venture initiatives in the fertilizer sector
 8Details of the New Investment Policy-2012-13
 8Details of the the latest DOF stand on allocation of gas to the fertilizer sector
 8Details of the interim recommendations of the Task Force on Direct Subsidy
 8Way forward on Direct Subsidy
 Click on our Reports section for more

MOEF defers nod for ABNL’s urea expansion project

May 17: There appears to be complete disconnect between the Government’s resolve to achieve self-sufficiency in urea production and Ministry of Environment and Forests’ penchant for procedures.
 8A projects assessment committee of the Ministry of Environment and Forests (MOEF) recently decided not to fix terms of reference for environmental impact assessment for the ABNL's proposal for additional brownfield expansion of its ammonia-urea complex at Jagdishpur in Uttar Pradesh.
 8ABNL has applied for setting up of one 2200 tonnes per day (TPD) ammonia unit and one 3850 TPD urea unit along with related offsite, utility and auxiliary facilities.
 8At its meeting held in March, MOEF’s committee decided: “the Ministry vide letter no. J-11011/20/2010-IA.II(I) dated 25th April, 2011 accorded environmental clearance for the 1st expansion and the project is yet to be implemented. In light of the Ministry's circular no. J-13012/116/2009 IA II (T) dated 22nd March, 2010, which specifies consideration of projects only once the implementation of earlier phase has commenced. Therefore this project proposal cannot be considered for the award of TOR. The Committee did not recommend the project proposal for award of TOR and proposal was differed till physical implementation can be demonstrated and supported by authenticated documents.”
 8According to an analyst, the Committee perhaps did not realize that most of the urea expansions projects have failed to take off for want of allocation of gas and due to delay in announcement of new urea pricing policy.
 8The Government’s resolve to achieve self-sufficiency in urea production in next five years was articulated by President Pratibha Devsingh Patil in her address to Parliament at the start of ongoing budget session.
 Click our reports section to view the details.

DOF fixes Chennai-Port Blair fertilizer freight

May 17: The Department of Fertilizers (DOF) has fixed a sea freight of Rs 3180/tonne for movement of fertilizers from Chennai to Port Blair.
8According to a DOF memorandum, the freight rate includes transportation charges from warehouse to Chennai port, harbor charges, logistics costs, insurance, taxes etc.
 Visit our reports section to access for the details.

Lower D-6 output sends power sector into a tizzy-I: No D-6 gas for power sector by 2013-14

May 16: The latest gas supply projections from the D-6 field -- projected to average 28 mmscmd in the current financial year, and was then expected to slide to around 24 mmscmd in 2013-14 and further to 20 mmscmd by 2014-15 -- has sent the power sector into a complete tizzy.
 8A calculation by the Central Electricity Authority (CEA) has drawn up a scary picture: given the priority of allocation to the fertilizer and LPG sectors, net availability of D-6 gas to the power sector is likely to be nil by the year 2013-14.
 8Availability of domestic gas from sources other than the D-6 block is estimated at 24 mmscmd in 2012-13 and 21 mmscmd in 2013-14 against the current availability of 38 mmscmd.
 8There was hope that LNG can be pooled with domestic gas by the power sector but such hope has been dashed by the petroleum ministry`s projection that only 10 mmscmd of additional LNG will be available in 2012-13 and 16 mmscmd in 2013-14 because of infrastructure constraints. This is too little LNG for the pooling mechanism to work efficiently.
 8About 9,500 MW capacity of power plants are expected to be commissioned shortly. With a combined capacity of 25,000 MW (15,000 MW existing and 9,500 MW new). The CEA has estimated that with such dismal availability figures, the Plant Load Factor (PLF) is likely to come down to a mere 32% from the present level of around 55%., the power plants are estimate to operate at a Plant Load Factor (PLF) of only 30%.
 8Operation of a gas power plant below the 50% PLF mark is suppose to be infeasible due to techno-economic reasons.
 (Click on our Reports section for more information)  

Lower D-6 output sends power sector into a tizzy-II: Pullok Chatterjee says priority in allocation to fertilizer sector to stay

May 16: The dismal gas availability scenario prompted Pulok Chattrejee, Principal Secretary to the Prime Minister, to call a meeting of power producers and representatives of the power and petroleum ministries. 
 8The power developers made an adamant demand for amending the order of priority for gas allocation stipulated by the EGoM and accord first priority to the power sector in place of the fertilizer sector. The power companies have argued that while power cannot be imported, fertilizer can be procured from the international market to meet domestic requirements.
8At worst, the power sector demanded that pro rate cuts in gas allocation be done uniformly across all sectors instead of imposing such cuts only on power units.
8But Chatterjee ruled out any changes in the order of priority in allocation of gas to the fertilizer sector. 
8The Principal Secretary was of the view that pro rata cuts on the fertilizer sector would increase the subsidy bill sharply as urea imports would go up as a consequence. .
8It was further argued that fertilizer units should get priority because they use both the chemical and thermal properties of gas.
8PMO`s decision also stemed from the fact that India was a very large importer of urea in the world market and any further increase in import will sharply escalate international prices, thereby increasing the subsidy bill.
(Click on our Reports section for more information)

PotashCorp gives a spin to India’s distorted fert subsidies

May 16: Canada’s Potash Corporation has given a new interpretation for India’s distorted fertilizer subsidies, imbalanced use of nutrients, lower crop yields and food inflation.
8In keeping its trend of being outspoken about the Indian market, PotashCorp has blamed politics for the subsidy regime’s bias for nitrogen.
8PotashCorp President & CEO Bill Doyle said: “The problem is that the percentage of the Indian fertilizer subsidy is overwhelmingly nitrogen. 68 percent of the subsidy is going on the nutrient which is in the most supply. Why is that? It’s because there is a domestic industry in India which gets a lot of attention politically, as you can imagine, and there is not an indigenous potash industry. They need to import all their potash.”
8The transcript of a question and answer session with analysts organized on 10 May quotes Mr. Doyle as saying: “ The phosphate business in India, they don’t have phosphate rock, so they import phosphate rock to make phosphoric acid, but there again, you see 20 percent of the subsidy goes to phosphate, this is something that we think is short-term. We think that the government will have to recognize this because it is leading to even greater food inflation. It will lead to imports. It will lead to substantial problems, and it’s a very expensive policy.”
8The transcript also quotes Wayne Brownlee, PotashCorp’s Executive Vice-President and Chief Financial Officer as saying: “You’re going to have to live with the political scenario in India where they’re making short-term political decisions that are not good agronomic decisions.”
8PotashCorp is, however, highly bullish about the prospects of enhanced potash exports to India in the long run. It believes that India is “making a transition in their subsidy system, and so we think that this will be resolved shortly and that India will be back on the road to growth and obviously increased (potash) shipments.”
 8Answering a question from the floor, Mr. Doyle said: “India’s going to be unbelievably exciting for us. Yes, we go through these short-term things India’s going to resolve its subsidy – nutrient subsidy system because they have to. There’s going to be so much pressure with this – this burgeoning population and the demand for food. You can’t have 45 percent food inflation over 3 years because it affects the poor disproportionately, and so, you know, we see this risk aversion period coming to an end.”
 Visit our reports section to access the transcript of the conference and the accompanying four presentations.

MCFL’s MD reappointed; to get token salary

May 16: The Board of Directors of Mangalore Chemicals & Fertilizers Limited (MCFL) has reappointed Deepak Anand as its Managing Director for a further period upto 30 September 2012 or till the date he continues to be the nominee of the promoters, UB group, on the board of the company, whichever is earlier.
8According to a disclosure made by the company to the National Stock Exchange, Mr. Anand would draw a token salary of Rs one per month.
Visit our reports section for additional information about Mr. Anand’s reappointment.

ABNL’s fert sales cross Rs 2000-crore mark in 2011-12

May 15: Aditya Birla Nuvo Limited’s (ABNL’s) urea and allied agri-inputs business (Indo Gulf Fertilisers IGF division) has crossed the Rs 2000-crore sales mark in 2011-12 following commencement of trading in imported fertilizers.
8In a presentation on its Q4 and annual results, the company said the division boosted its turnover by 69% to Rs 2107 crore in 2011-12 from Rs 1244 crore in previous year.
8Similarly, IGF enhanced its Earnings before interest tax depreciation and amortization (EBITDA) by 20% to Rs 211 crore from Rs 176 crore.
8The presentation says: “higher urea sales, increased share of neem-coated urea, commencement of trading in imported fertilizers (inclusive of pricing gain due to favourable forex movement) and increase in sales of seeds and agro-chemicals contributed to the earns growth.
Visit our reports section to see the company’s presentation, results and release.

IFA unveils new initiative on fertilizers-food security matrix

May 15: International Fertilizer Industry Association (IFA) and its leading regional associates have launched a new website to focus on the pivotal role played by fertilizers in meeting the challenges of global food security.
8Named rootsforgrowth.org, this website is aimed at informing policy debates and encouraging dialogue. Its knowledge domain includes an introductory “Roots for Growth” video, interactive infographics on food/nutrition security, soil health, environmental stewardship and sustainable agriculture.
8According to IFA release, the new initiative has been launched keeping in view the forthcoming meeting of Group of Eight (G8) leaders at Chicago on May 18 and 19. The topics of agriculture and nutrition security are expected to feature high on the proposed conference agenda.
8Visit rootsforgrowth.org to get an idea of IFA initiative and our reports section to access IFA release

Declining gas output from D-6 field: Plant Load factor falls perilously low, Lanco seeks extension of prorata cuts to fertilizer and CGD units

May 14: With the Plant Load Factor (PLF) of gas-based power plants, operating exclusively on D-6 gas, falling to an all time low of 40%, Lanco Kondapalli Power Limited has requested the petroleum ministry to apply pro rata cuts on supply of D-6 gas to all fertilizer and City Gas Distribution (CGD) units and not just on the power sector.
8Due to the continuous reduction in gas supplies from RIL`s KG-D6 fields, gas-based power plants which have been allocated only D-6 gas are operating at a PLF of only 40%
8The low PLF is neither technically advisable nor financially viable. In case of any further disruptions in supply of D-6 gas, these power plants are likely to shut down.
8Lanco has claimed that if supplies of D-6 gas goes down any further, around 4,500 MW of operating gas-based power plants will be stranded.
8Furthermore, it has to be noted that new power plants of 5,000 MW capacity are ready for operations and are awaiting gas allocation from D-6 field. Thus, in all, close to 10,000 MW capacity of power plants are likely to be stranded for the want of D-6 gas.
8Lanco has argued that as the power sector is reeling under a severe crisis, which has been further compounded by pro rata cuts on supply of D-6 gas, the fertilizer and CGD sector are being provided their full quota of D-6 gas on priority.
8The company has now requested the ministry to ensure that gas supply reduction on pro rata basis is applied to all fertilizer and CGD units as it is in the case of power sector so that gas-based power plants are able to operate at a minimum of 50-55% PLF.
 (Click on Details for more information)   Details

Gas evacuation from ONGC's North Tapti field: GSPC works out swapping arrangement

May 14: Gujarat State Petroleum Corporation Ltd. (GSPC) has suggested a swapping arrangement to evacuate gas from ONGC`s soon to be commissioned North Tapti field.
8The North Tapti gas field is connected to GSPC`s gas pipeline network. The delivery point for the North Tapti gas is Cairn`s onshore terminal at Suvali.
8As per the swapping mechanism GSPC will deliver 0.68 mmscmd of North Tapti gas to Kribhco`s fertilizer unit at Hazira, whereas GAIL will retain equivalent quantities of PMT or APM gas which would otherwise be supplied by the gas major to Kribhco through its own pipeline network under the existing contracts.
8In other words, the APM or PMT gas of GAIL will be swapped with North Tapti gas where the swapping will take place on GAIL`s pipeline network and GSPC will only transport physically without any operational issues. 
8The swapping mechanism will not require sale of North Tapti gas to Kribhco. 
(Click on Details for more information)   Details

Govt resists pressure to hike fertilizer subsidy bill

May 14: The Government neither proposes to cut urea price nor provide any special fertilizers price concession to drought-affected areas. It articulated this stance on fertilizer prices through answers to two separate questions raised last week in Parliament.
8Answering a question in Lok Sabha, the Minister of State for Chemicals and Fertilisers Srikant Kumar Jena said: “The issue of reducing the prices of chemical fertilizers to the drought prone and non-irrigated areas of Gujarat and Madhya Pradesh is not under consideration of the Government.”
8Answering another question on prices of decontrolled fertilizers, Mr Jena said: “A number of representations including those from the States and Public representatives have been received on the issue of prices of P&K fertilizers. Appropriate replies have been sent to all.”
8Mr. Jena also provided detailed information on issues such as fertilizers consumption and product-wise demand for fertilizers during the Kharif 2012 in reply to certain other questions.
Visit our reports section to access some important questions raised in Lok Sabha.