FACT, Petronet ink pact for LNG supply

The volatility in LNG price is no longer an impediment to FACT’s fertiliser production as the public sector company has reached a deal with Petronet LNG Ltd (PLL) to receive natural gas at attractive rates.

“We have entered into an agreement with PLL for the whole FY20 to supply LNG, which will be marketed by a combine of GAIL, IOC and BPCL”, said D Nandakumar, Director (Marketing), FACT.

However, he declined to reveal the rates at which FACT made the deal. “We have a requirement of around 10 million mmBtu and will start drawing the gas from the middle of May,”he told BusinessLine .

The LNG price in FY19 was high at $10-$12/mmBtu, forcing the fertiliser company to run its plants with imported ammonia which was expensive at $310-$350/tonne. This has lowered the production capacity utilisation to 75 per cent of the maximum achievable level, he said, adding that last year’s floods also disrupted production for two fortnights.

The import price of phosphoric acid, a main requisite for Factomfos production, is also showing a softening trend. The company’s annual requirement of sulphur is two lakh tonnes, of which, 1.2 lakh tonnes are being supplied by BPCL-Kochi Refinery. “We are exploring the option of enhancing this intake,” he said.

With all these positive developments, Nandakumar, who is also holding the additional charge of Director (Technical), said FACT has geared up to start the financial year on an optimistic note with an in-house production target of one million tonnes. Of this, 8 lakh tonnes will be Factomfos and two lakh tonnes ammonium sulphate. Last year, the total production was 7.5 lakh tonnes. In addition, the company is in the process of floating tenders to import one lakh tonnes products such as Muriate of Potash and DAP. However, retirement of senior officers this year is a major concern and FACT has started a recruitment drive to appoint 270 persons, which will be completed by June. Last year, around 200 permanent and 100 fixed tenure employees were recruited.

On the Caprolactum plant, he said the competition from China and surging raw material prices have forced FACT to shut down this plant five years ago . However, it is now looking at reviving the production by carrying out trial runs in two phases in May and September. The commercial production is scheduled to commence on FY21 with a production of 50,000 tonnes. This will add ₹500 crore to the top line.

When asked about the drought conditions affecting sales, he said, “It is too early to predict. FY19 was good due to widespread rains. In the eventuality of low rains and drop in demand, the company will explore options to market products beyond South India through a tie-up with fertiliser companies like NFL, RCF and HIL.”

FACT is looking at a turnover of ₹2,600 crore in FY20 vis-a-vis ₹2,000 crore in FY19. “We have achieved an operating profit in the last fiscal. But interest burden is a concern. Once the government approves the restructuring package, we will come out of the red,” Nandakumar, said.

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