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In a bid to ensure smooth supply of soil nutrients in southern states, the government is planning to continue paying subsidies to three naptha-based urea plants including MCFL beyond April 16.
The Centre on January 7 had decided to give subsidy for next 100 days to Vijay Mallya-led UB Group firm MCFL, SPIC and state-run Madras Fertilisers to restart these facilities which were closed since October 2014.
“The Fertiliser Ministry is working on a Cabinet note for continuing subsidy payments to these three naptha-based urea plants, as there is only one active urea plant in Southern India and at the same time these are not connected with gas pipelines,” a government official said.
Mangalore Chemicals and Fertilisers Ltd (MCFL) is located at Mangalore in Karnataka, while SPIC and MFL’s plants are based in Tamil Nadu.
The three companies had halted production of urea in October last year after subsidy payments were stopped.
The official said that the government wants to ensure that there is no shortage of urea in southern parts of the country, as besides these three plants there is only one active urea plant in four states - Karnataka, Tamil Nadu, Kerala and Andhra Pradesh.
The government had stopped extension of subsidy to naptha-based urea plants as cost of production of urea was as high as Rs 43,000 per tonne as compared to Rs 18,000 per tonne for plants using gas as feedstock.
Fertiliser Minister Ananth Kumar had also requested the respective state governments for providing land for gas pipelines and asked GAIL to provide connectivity to these plants at the earliest.
Urea is a controlled commodity and its selling price is fixed at Rs 5,360 per tonne. The difference between cost of production and retail price is paid as subsidy to manufacturers.
Pune-based Deepak Fertilisers has been competing with Kolkata-based industrialist Saroj Poddar-led Zuari Group for taking control of MCFL since July 2013.
At the end of December 2014, Zuari Fertilisers & Chemicals Ltd - which is part of promoter group - held 16.47 per cent stake in MCFL while that of Deepak Fertilisers stood at 29.05 per cent.
Vijay Mallya-led UB Group has over 21 per cent stake in MCFL.
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