[Reader-list] Indigenous Fertiliser Capacity

[A. Mani]

Source: People's Democracy
Feb'2012


AUGMENTING INDIGENOUS FERTILISER CAPACITY
Another Cock and Bull Story


Nishith Chowdhury

IN September 2002, the then NDA government decided to close down seven
urea manufacturing plants, mostly in the eastern region of our
country. These were the Barauni (Bihar), Haldia and Durgapur (both
West Bengal) plants of the Hindustan Fertiliser Corporation (HFCL) and
the Sindri (Jharkhand), Gorakhpur (UP), Talcher (Orissa) and
Ramagundam (AP) plants of the Fertiliser Corporation of India (FCI). A
similar decision was taken about three phosphatic fertiliser plants of
Pyrites, Phosphates & Chemicals Ltd (PPCL) too. The decision was
hailed as historic by the business houses as part of the new economic
policies of the government and the question of self-sufficiency was
totally sidetracked.



Subsequently the urea plant of NLC and Cochin-I urea plant of FACT
were also closed down, thereby wiping out a capacity of about three
million tonnes of urea per year.



The justification of the decision was that fertiliser, especially
Urea, is available in abundance in the international market at much
lower prices. International fertiliser cartels are active; they offer
urea at a cost lower than the indigenous production cost. The price of
imported urea was said to be quite minimal --- only 80 dollars per
tonne.



The production cost of a large number of public sector urea units with
naphtha as feedstock is quite high in comparison to the gas based
units set up along the HBJ (Hazira-Bijaypur-Jagadishpur) gas pipeline.



DESIGN

OF CARTELS

This was exactly the design of the international fertiliser cartels
--- force the country to close down its own capacities by offering the
product at throw-away prices, make the country import dependent and
then dictate the market. This is exactly the situation today. Import
of urea during 2010-11 was a hopping 8.7 million tonnes and that of
DAP was 7.8 million tonnes. As per the annual report of 2010-11 of the
Department of Fertilisers, urea price, which was US 280.75 dollars fob
per MT in January 2007, went up to US 815 dollars fob per MT in
January 2008. In a similar manner the DAP price went up from US 320.5
to US 802 dollars during the same period and was US 1331 dollars per
tonne by May 2008.



On the other hand, urea production in the country has hardly
increased. In fact, there is no investment in the sector since 1995.
The capacity remains almost static at 20 million tonnes whereas the
consumption continues to increase at about 5 per cent per annum.
Farmers in India use about 28 million tonnes of urea annually, of
which 6-8 million tonnes are imported. The uptrend in the prices of
imported urea and that of feedstock necessary for domestic production
has pushed up the government's subsidy bill for the sector to nearly
Rs 100,000 crore, from the budgeted Rs 54,000 crore.



It was in this compelling circumstance that it was reported that on
August 4, 2011 the Cabinet Committee of Economic Affairs (CCEA) had
given approval to the proposal of the government to renovate the now
closed eight units of HFC and FCI. The proposal envisages revival of
the Sindri unit (Jharkhand) through a consortium of SAIL and NFL, of
Talcher plant (Orissa) through a consortium of GAIL, CIL and RCF, and
of Ramagundam Plant (AP) through a consortium of EIL and NFL, and of
the remaining five plants at Gorakhpur (UP), Korba (CG), Barauni
(Bihar), Haldia (WB) and Durgapur (WB) through private investment. It
has also been stated that other than the plants of Talcher and
Ramagundam, all other plants would be revived with natural gas as
feedstock.



DEMAND OF

NATURAL GAS

The projected additional requirement of gas for fertiliser sector, as
determined by the fertiliser ministry and communicated to the ministry
of petroleum and natural gas for allocation, is as seen in the table
alongside.



All the above proposals have been formulated with the assumption that
the ministry of petroleum and natural gas would make arrangement to
supply this additional quantity of gas by 2013-14. But what exactly is
the situation on this front?



To bring the gas-starved eastern sector of our country onto the gas
map, the demand of setting up a national grid has gained momentum.



It is reprehensible that the policy makers have continued to deprive
the eastern sector for a pretty long period. The union government



has finally decided to extend the HBJ gas pipeline from Jagadishpur in
Uttar Pradesh to Haldia in West Bengal via Bihar and Jharkhand on the
one hand and to set up a new pipeline from Kakinada (KG Basin gas) in
Andhra Pradesh to Haldia via Orissa across the eastern cost. The
decision, though taken about five or six years back, still remains on
paper.



In a seminar organised by the FICCI on petro products and natural gas
at Kolkata on September 8, 2011, L Man Singh, chairman of the
Petroleum and Natural Gas Regulatory Board faced a query regarding the
progress of setting up of the proposed gas transmission lines. He then
told that the Reliance Gas Transmission Infrastructural Ltd, in charge
of transmission of KG Basin gas, had said that they were not that
eager to set up the line right now due to non-availability of
sufficient gas. Similarly, the GAIL had intimated that the projected
extension of HBJ pipeline had been deferred due to inadequate supply
of gas. On October 23 last year, the GAIL officially announced that it
had deferred the commissioning deadline of several of its pipeline
projects including that of Jagdishpur-Haldia pipeline (phase-I) whose
original schedule of commissioning was March 2012. As per GAIL, delay
in commissioning of the LNG terminals at Dabhol and Kochi has also
contributed to the deferment in the projects completion schedule.
Revised schedule of the completion of the pipeline is 36 months from
date of publishing of Section 3(1) of the Petroleum & Mineral
Pipelines (Acquisition of Right of User in Land) Act, which is pending
even now. On January 8, 2012, indianfertiliser.com reports that the
RGTIL had been dilly dallying on building the
Kakinada-Vasudevpur-Haldia pipeline. What is exactly in RIL's mind is
not known. Clearly, unless production is ramped up in the D-6 block,
no gas can be pumped in through the Kakinada end. Thus the setting up
of the 928-km Kakinada-Vasudevpur-Haldia pipeline with a design
capacity of 26.7 mmscmd is quite uncertain though Section 3(1) of the
said act was reportedly notified for the pipeline quite a long time
back.



Thus the availability of gas remains totally uncertain and hence there
is uncertainty over the revival of the closed units. This only

means certainty of more and more imports at the ruling high prices,
and thus the interest of the votaries of import remain well protected
for the years to come.



So what? After all, there is no rationing in giving assurances!



While this is the actual position in the natural gas front, the
government remained evasive. In this regard, union minister of
chemicals and fertilisers, M K Alagiri responded about two months
later, on October 11, 2011, to the letter written to the prime
minister on August 20, 2011 by Basudeb Acharia, leader of CPI(M) group
in the Lok Sabha. The minister said: “I would like to assure that my
department is committed to revive the closed units of HFCL including
its Durgapur Unit.” But the minister did not answer any of the
questions raised by Acharia.  He did not tell which magical band would
make the requisite quantity of 69.45 million standard cubic metres of
gas per day available. He did not say a word about when the setting up
of the gas transmission line by GAIL and RGTIL will start and when
they would be ready for commissioning. He did not communicate why
there was the proposal for revival of Sindri, Ramagundam and Talcher
plants through a consortium of PSUs and why all other closed plants
were left open for private participation. Nor was there any answer to
why the initial proposal of the GAIL to make synthesis gas available
through coal gasification route in an ECL mine for Durgapur plant has
now been shifted to Talcher? After all, we have become habituated to
listening to the baseless assurances of the successive ministers and
governments!



The import lobby is strong enough. The import of urea at the ruling
high prices is now a compulsion and will therefore continue
undisturbed, while ministers and bureaucrats would continue to feed us
on assurances.



FINALLY

WHAT

So what is finally going to happen? The Government is out to sell the
entire properties of these closed factories to private parties on
various hitherto unheard of methods --- like revenue sharing --- to
manufacture some quantity of fertiliser at least. For this purpose,
supply of natural gas at the factory battery limit is also being
assured by the government. As already stated, availability of gas is
yet another story and therefore the entrepreneurs would be free to
utilise the land and infrastructure for other purposes including of
course real estate businesses.



In sum, the successive governments have already made the country
import dependent in regard to urea and now once again they are
befooling the public in the name of sincere efforts to revive the
closed urea capacities in the country through a handover of the much
valued properties to the business houses of their choice. The country
is already facing an acute shortage of fertilisers; farmers are
confronting heavy price rises in case of all ingredients like seeds,
fertilisers, insecticides etc. Availability of all the ingredients in
time, which was hithertofore ensured by the government, has now been
left to the so-called market forces.



In the meantime, the government has almost done away with the public
distribution system. Farmers are not getting remunerative prices for
their produce and are gradually losing interest in cultivation. Farmer
suicides all over the country has already become a matter of serious
concern.



However, even at this hour of a serious crisis in the agriculture
sector which is affecting the food security of the country, the union
government has started playing yet another game over the indigenous
availability of a fertiliser. There is no end to the miseries of the
people, but the ongoing fertiliser policies of the government are
factually pushing the country to a much difficult situation. The
situation demands a united movement of the workers and peasants
against the policies of the government.

_________________________________________________________________


Best

A. Mani









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A. Mani
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