The Tamil Nadu government has agreed to forego value added tax on naphtha-based fertiliser units paving the way for the reopening of Madras Fertilizers and SPIC.

The Chief Minister O Panneerselvam in a letter to the Prime Minister Narendra Modi said despite the State facing a huge financial crunch, it will forego VAT on naphtha used by the two urea units “in the interest of commencing the operations of these two plants, the livelihood of hundreds of workers and the interest of farmers.”

He urged that the oil marketing companies that supply naphtha feedstock should sell it at export parity prices which are significantly lower than the import parity price they are now charging the fertiliser companies.

Panneerselvam urged the Centre to issue the notification continuing the urea subsidy immediately to the two fertiliser units in Tamil Nadu.

The State government’s decision follows a letter from the Union Fertiliser Secretary to the Tamil Nadu Chief Secretary, that the Centre has decided to allow these units to operate for 100 days and the State Government should consider waiving VAT on the naphtha used by Madras Fertilizers and SPIC.

The Chief Minister also reiterated the request that the subsidy should be continued till natural gas connectivity is provided to these two units by the Government of India.

MFL and SPIC suspended urea production from October 1, 2014, after the Centre decided to stop subsidy for naphtha-based urea units.

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