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GSFC mulls setting up of phosphoric and sulphuric acid units at Sikka

Oct 30: Gujarat State Fertilizers & Chemicals’ (GSFC’s) is considering setting up new phosphoric Acid and or sulphuric acid plants at its Sikka DAP/NPK fertilizer plant.
8In a recent presentation to investment analysts, the company disclosed that it is reviewing detailed feasibility report on this Rs 1300-crore project to arrive at an investment decision.
8GSFC is proceeding ahead with its proposal to set up a Rs 9000-crore integrated fertilizer & petrochemical complex at Dahej. The project would have a capcity to produce one million tonnes per annum (mtpa) of urea, 100,000 tpa of caprolactum and 30,000 tpa of high-speed nylon-6 chips.
8According to the presentation, the company has acquired land for the project and is development the desired plot at the site. It is also review the technologies to be deployed in the complex.
8The presentation also gives an update on projects under implementation and various issues faced by the company and the industry.

IFFCO Paradeep to source molten sulphur from IOC?s nearby refinery

Oct 30: Indian Farmers Fertiliser Cooperative Limited (IFFCO) intends to source molten sulphur for its fertilizers complex at Paradeep in Odisha from Indian Oil Corporation (IOC’s) upcoming Paradeep refinery.
8IIFCO has accordingly invited offers form competent transports for prequalification for transport of two lakh tonnes per annum of molten sulphur from IOC Refinery to its plant.
Both the sourcing of sulphur from nearby refinery and in the molten form is expected to improve the cost competitiveness of Pardeep fertilizers complex. IFFCO has, however, not touched this issue at all in its pre-qualification document.
8Paradeep complex comprises three streams of DAP plant of 2090 MTPD capacity, two streams of 3500 MTPD capacity of Sulphuric acid plant and single stream of 2650 MTPD capacity of Phosphoric acid plant. Annual Capacity of IFFCO Paradeep plant is 1.92 million tons of phosphatic fertilizer (DAP / NP).

RCF solicits bids for supply of rock phosphate

Oct 29: Rashtriya Chemicals and Fertilisers Limited (RCF) has invited bids for supply of 40,000 tonnes of rock phosphate with minimum phosphate content of 29% at Mumbai Port.
Of the total quantity, half is required on firm basis and the remaining half at RCF’s purchase option.
8As for shipping schedule, the tender document says: “20,000 MT (+/- 10 %) -Firm to be shipped in the 1st half of December’14 and 20,000 MT (+/-10%) at RCF’s option for shipment during January’15.”
8The bidders are required to furnish along with their offers the justification for suitability of quoted rock phosphate for production of ammonium nitrophosphate (ANP) nitrophosphate and phosphoric acid at RCF plants.
8The last date for submission of tenders is 7 November 2014.

CIL start partial operations at Vizag fertilizers complex

Oct 29: Coromandel International Limited (CIL) has resumed partial operation of its cyclone-affected complex fertilizers production facility at Visakhapatnam.
8The complex is also expected to operate at sub-optimal level during November.
8It had suspended its operations on 12th October with the arrival of Hudhud cyclone.
8In a brief disclosure to the BSE and NSE, the company says “the power supply has been restored to our unit through one of the feeders. Certain intermediate plants and one of the granulation plants have started operating on partial load and teething problems are being addressed.”
8It adds: “The asset integrity inspection work has been initiated for all the plants and the associated infrastructure facilities and, on its completion, the plant operations will be revamped up in a phased manner after taking necessary safety precautions.”
8CIL says that the production during October-November period is likely to be lower than the normal operating capacity of the entire complex.

MOEF issues green nod for GSFC's two projects at Sikka DAP complex

Oct 28: The Ministry of Environment and Forests (MOEF) has granted separate environmental clearances (ECs) to Gujarat State Fertilizers & Chemicals’ (GSFC’s) Sikka DAP expansion project and the associated project for improving the logistics and storage for imported intermediates.
8In its EC letter dated 9th October 2014 for DAP expansion project, MOEF has stipulated that the company would operate its Rs 900-crore project DAP/complex fertilizers expansion plant with zero discharge of effluents.
8The letter says: “At least 5% of the project cost shall be earmarked towards the enterprise social commitment (ESC) based on public hearing issues and item-wise details along with time-bound action plan shall be prepared and submitted to the Ministry’s regional office at Bhopal. Implementation of such program shall be ensured accordingly in a time-bound manner.”
8The project envisages setting up of D-train with a capacity to manufacture 1650 tonnes per day (tpd) of DAP or 1870 tpd of NPK complex fertilizers.
8In the environmental and CRZ clearance dated 16th September relating to logistics and storage, MOEF says: “This Clearance is subject to final order of the Hon'ble Supreme Court of India in the matter of Goa Foundation Vs. Union of India in Writ Petition (Civil) No.460 of 2004 as may be applicable to this project.”
8This Rs 119-crore project provides for dredging of the berthing area for ships at captive jetty in the Sikka creek of the Gulf of Kachchh, installation of two 10,000 MT storage tanks for ammonia and phosphoric acid and laying of ammonia and phosphoric acid pipeline between the marine terminal and the DAP plant.

DOF fixes freight rates for alternative route for fert transport in NE

Oct 28: The Department of Fertilizes (DOF) has specified an alternative route and freight rates for transportation of fertilizers in the North-East for period ending 31st March 2015 after taking into account the railway gauge changeover project.
8In an office memorandum dated 22nd October, DOF has specified primary and secondary freight for movement of urea, DAP, MOP and complex fertilizers to Manipur, Tripura, Mizoram and Barak Valley area of Assam during the Mega Block. This refers to closure of Lumding-Silcher MG section from 1st October 2014 to 31st March 2015 for conversion of narrow gauge to broad gauge.
Visit our report sections for the details.

Pooling gas prices for power-I: Pipeline tariff to be reduced by 20%, marketing margin to be slashed

Oct 27: After the petroleum ministry under Modi government has given the much awaited gas price notification, the ministry is now working on a model for pooling of domestic gas with imported RLNG for the power sector so that stressed and stranded gas based power generation capacity can be revived.
8A Cabinet meeting is likely to be held soon, where the power ministry and petroleum ministry will present a joint note on pooling of gas prices for the perusal of the Cabinet Committee of Economic Affairs (CCEA).
8For the gas pooling proposal to be acceptable to the various stakeholders it is assumed that there will be a 20% tariff cut in transportation tariff for the incremental domestic gas and RLNG flows.
8While the petroleum ministry has okayed the reduction, it is subject to the concurrence of petroleum regulatory board PNGRB. While GAIL has fallen in line with the tariff cut, consent of other operators such as RTGIL and GSPC are yet to be obtained.
8Power minister, Piyush Goyal, had in fact sought a further reduction in tariff on the presumption that there was significant idle capacity in GAIL's pipeline. However, after he was informed that the idle capacity existed only in the new pipelines and the pipelines which will be utilised for supplying gas to the standard power plants are running at high capacity, he withdrew his request.
8While there will be a reduction in the pipeline tariff, GAIL has also agreed to lower the marketing margin to $0.1/mmbtu from the existing $0.18/mmbtu, in order to bring down the delivered cost of gas.
8On account of these concessions on transport tariff an dmarketing margin, GAIL is likely to incur a cost of Rs 15,000 crore and it was in this context that the petroleum ministry had argued that the gas major will not be able to take any further hit by reducing the rates any further.
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Pooling gas prices for power-II: Domestic gas allocation to be scarce

Oct 27: There will be very little domestic gas available under the pooling mechanism for the next few years as the EGoM order for maintaining supply of 31.5 mmscmd to the fertiliser sector is to be simultaneously adhered to.
8After providing for the minimum required supply to the fertiliser sector, the availability of NELP gas for the power sector will be nil in the current fiscal.
8Moreover, the supply will be a mere 4.53 mmscmd in the next fiscal 2015-16.
8The supply is expected to increase thereafter but only if the cap on gas supply to fertiliser sector at 31.5 mmscmd, which is valid only till 2015-16, is extended at the same time.  
8If this proposal is not accepted and more gas is to be supplied to the fertilizer sector, there will be lower NELP gas availability for the power sector till 2018-19.
8It is pertinent to note, that in case the cap for the fertilizer sector remains at 31.5 msmcmd, the availability of NELP gas for the power sector  be 13.3 mmscmd in 2016-17, 18.19 in 2-17-18 and 28.74 in 2018-19.
8Pertinently, in view of the demand from other sectors, it is unlikely that any non-NELP gas (that's gas from the nominated blocks or other sources) can be supplied to power sector in near future. 
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Pooling gas prices for power-III: Spare RLNG capacity at only about 18 mmscmd in the next three years

Oct 27: Import of natural gas forms an important aspect of the pooling proposal, specially as the domestic gas availability is limited. However, the import of gas can be substantially hindered by the low spare regasification capacity that exists in the country.
8For the next three years, regasification capacity of only about 18 mmscmd is expected to be available to handle RLNG imports in the country. The existing capacity is available at Dahej, Hazira and Ratnagiri terminals.
8Moreover, this capacity will further lower during the monsoon period as the Ratnagiri terminal is without break water and cannot operate during monsoon period from May to September.
8Efforts are being made to enhance the existing capacity by addition of new regasification terminals, both in the west and east coast in the country, and the capacity is expected to rise up to 27 mmscmd but only by 2017-18.
8The petroleum ministry is confident that the constraint on import due to lack of regasification capacity will be removed with addition of regasification capacities which are at various stages of implementation but this will only after a gap of three years.
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Pooling gas prices for power-IV: Two scenarios visualised

Oct 27: The power ministry and petroleum ministry have laid down two alternatives for implementing the pooling mechanism.
8As per the draft note, under option I, pooling of domestic gas with RLNG will be done only for stranded gas based plants with a capacity of 16,107 MW which have no gas supply and will exclude those plants that are being supplied with APM gas.
8Under option II, the APM capacity will also be included and pooling of domestic gas with RLNG will be for the entire 24,149 MW of gas based capacity.
8It may be noted that the APM based plants of 8,042 MW are presently operating at an average of 40.1% PLF whereas the remaining 16,107 MW capacity is totally stranded.
8While the ministries have considered both scenarios, the option II is going to face stiff resistance from states allocated power from the APM plants as under the pooling mechanism the cost of generation for APM plants will increase from their present level.
8Gas supply and capacity utilisation norms have been worked out for both scenarios along with the expected funding gap that will be required to be plugged.
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Pooling gas prices for power-V: Conditions laid down for system to work

Oct 27: The cost of the power generated from the pooled gas will be capped at Rs 5.50/ unit only, leading to a revenue gap as the cost of generation will be higher than the sale price. However, to ensure that the revenue gap is not a deterrent for the proposal, the power ministry and the petroleum ministry have suggested measures to fill the gap. The suggested measures are as below:
8Streamlining procedure for availing customs duty waiver on imported LNG for the gas based power plants: The ministries have noted that while custom duty on imported LNG used for power generation is exempted, the procedure to avail this waiver needs to be streamlined further.
--The petroleum ministry noted that the customs duty applicable for import of LNG is 5.15% which is exempted for power plants. In actual practice though the power plants are not able to avail this exemption.
--Accordingly, the Department of Revenue will be required to give a relevant notification so that the LNG importer is actually able to take the exemption and pass the benefits to the power plants.
8Waiver on VAT on gas: The two ministries have sought a waiver on Value Added Tax (VAT) on pooled gas consumed in power generation by the concerned state governments.
--This waiver will have to be based on the invoicing done by the gas supplier.
--Currently, different VAT rates on gas are levied in different states where the gas based power plants connected to the gas grid are located.
8Waiver of CST: The ministries have also requested the Empowered Committee of State Finance Ministers to consult and waive off the Central Sales Tax (CST) to be levied on the pooled gas.
--As CST is collected and retained by respective states, a waiver of CST can be made only after consultations with the state governments.
--Moreover, other local taxes like entry taxes will also need to be exempted so that the pooling mechanism can be implemented without much financial burden on the government or developers.
8Support from NCEF: Apart from the various exemptions and waivers, the power ministry and petroleum ministry have also suggested drawing funds from the National Clean Energy Fund (NCEF) so that the revenue gap is adequately bridged.
--The support from NCEF will be utilised towards bringing down the cost of pooled gas delivered at the plant site to a level considered appropriate by the CEA to enable the power plants to achieve a variable cost of Rs 4.65/ unit (assuming a fixed cost of Rs 0.85/unit).
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Pooling gas prices for power-VI: Capping of fixed cost will require financial reengineering

Oct 27: An important assumption of the proposed gas pooling price mechanism is that the fixed cost of the power plants will be capped at Rs 0.85/ unit. This, however, calls for considerable amount of financial engineering.
8It is pertinent to note that the actual fixed cost for the stranded gas based plants is in the range of Rs 1 to Rs 1.50/unit at 85% PLF. As the PLF goes down, the fixed cost goes up. Accordingly, at 40% PLF the fixed cost comes out to be Rs 2.7/unit.
8However, in the gas pooling mechanism, the fixed cost is suggested to be pegged at Rs 0.85/ unit for the purpose of allowing support from the NCEF.
8This would amount to developers foregoing their return on equity and on top of that bringing in funds to meet a part of the O&M expenses.
8To bring down the fixed cost, the Department of Financial Services and the plant operators will have to re-negotiate the terms of the outstanding loans with banks.
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Oct 27: Pooling gas prices for power-VII: Critical factors at play   Details
Oct 27: Pooling gas prices for power-VIII: Details of NCEF support when gas price is pegged at $6/mmbtu   Details
Oct 27: Pooling gas prices for power-IX: How GAIL will run the pool mechanism?   Details
Oct 27: Pooling gas prices for power-X: Interstate sale of gas to be free of VAT but SC verdict will have a final say   Details
Oct 22: Gas price hike to have 3-fold impact on fertilizer sector: Ind-Ra   Details
Oct 22: STC invites global tenders for import of urea   Details
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