The Hindu Business Line : LNG price being finalised for fertiliser units

WITH the first shipment of liquefied natural gas (LNG) from Petronet LNG due to arrive next week, the Government is in the process of finalising LNG prices for the gas-based fertiliser units within the next few days.

According to highly placed sources, negotiations between the three public sector companies which have the marketing rights for this gas, namely Indian Oil Corporation (IOC), GAIL (India) Ltd and Bharat Petroleum Corporation Ltd (BPCL), are on.

While these PSU oil majors are asking for $5.2 per million British thermal unit (BTU), the fertiliser units have been informed by its administrative Ministry that in case the cost of the feedstock exceeds $3.5 per million BTU, the excess will not be treated as a pass-through for paying subsidy.

As of now, the fertiliser units procure LNG from the PSUs at $2.5 per million BTU under the administrative price mechanism.

Industry sources have said that in case the increased cost of feedstock is not considered as a pass- through for calculating the subsidy, it would be impossible to run some of the gas-based plants which are already under pressure because of poor availability of gas and often have to replace the feedstock with naphtha which is almost four times costlier.

The Indian fertiliser industry currently consumes around 30-34 million standard cubic metres per day. According to estimates it can more than double if supply is assured in which case, the naphtha-based units too, can shift to gas with certain nominal technical modifications.

The other main users of gas fuel are the power industry and the manufacturing sector.

Industry sources said that a delegation from the fertiliser industry would take up the issue with the Fertiliser Secretary, Mr Nripendra Mishra, on Thursday to sort out matters with a focus on a "workable solution."

Gas from Petronet LNG project is expected to be available by the end of February before which all the contracts and rates and volumes will have to be in place, officials said.

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