Replace imported LNG with domestic gas to save ₹23,000 cr in fertiliser subsidy: FAI

Excerpt: Reassigning priority to the fertiliser industry in domestic gas allocation may help the government save up to ₹23,000 crore in fertiliser subsidy, the Fertiliser Association of India (FAI) has said.

Reassigning priority to the fertiliser industry in domestic gas allocation may help the government save up to ₹23,000 crore in fertiliser subsidy, the Fertiliser Association of India (FAI) has said.

Replacing every million standard cubic metre per day (mmscmd) of imported liquefied natural gas (LNG) with domestic gas can cut down the urea subsidy bill by ₹870 crore, said FAI Director-General Satish Chander here. “If the entire requirement of the urea industry is met through domestic gas, the urea subsidy will go down by more than ₹23,000 crore per annum,” he added.

Chander was briefing the media on the eve of FAI’s annual seminar, an event that will see industry captains and experts from all over the world deliberate on ways to make the Indian fertiliser industry viable and vibrant. The demand comes at a time when the subsidy burden on fertilisers is going up.

While the government having made a budgetary allocation of ₹70,000 crore towards fertiliser subsidy, the industry claimed that the actual subsidy requirement has overshot by an additional ₹14,000 crore on account of the 34 per cent increase in gas cost for urea and the increase in subsidy rate for phosphatic and potassic fertilisers.

According to the industry, gas used as feed accounts for more than 90 per cent of the variable cost of production. According to industry sources, fertiliser, which was been getting priority in domestic gas allocation in the past, has ceased to enjoy primacy since 2011.

This worsened further in 2013 when the government decided give additional quantity of domestic gas to the power sector. Accordingly, the share of domestic gas available to manufacturers of urea and complex fertilisers came down drastically from 76 per cent in 2012-13 to around 36 per cent currently.

As the imported LNG is costlier by $10 per million BTU (mmBTU), the industry has no choice but shell out more, FAI said. If the industry was getting 29.6 mmscmd domestic gas in 2012-13, it came down to 14.3 mmscmd in October this year.

The share of imported LNG, on the other hand, went up from 9.35 mmscmd to 25.3 mmscmd, it said. Chander, however, felt that the fertiliser sector should get priority in the allocation of domestic gas immediately after the rollout of the city gas distribution network