Gas price pooling to urea units to be effective from July 1

Gas price pooling to make available feedstock fuel to urea making fertiliser plants at a uniform rate will come into effect from July 1, the Oil Ministry said.

New Delhi: Gas price pooling to make available feedstock fuel to urea making fertiliser plants at a uniform rate will come into effect from July 1, the Oil Ministry said.

Under the plan, price of cheaper domestic gas will be averaged or pooled with cost of expensive imported LNG to create a uniform rate for fertiliser plants.

Fertiliser plants consume about 42.25 million standard cubic meters per day of gas for manufacture of subsidised urea. Out of this, 26.50 mmscmd comes from domestic fields and the rest 15.75 mmscmd is imported liquefied natural gas (LNG).

The USD 4.66 per million British thermal unit price of domestic gas is half the cost of LNG.

"The domestic gas will be pooled with re-gasified liquefied natural gas (R-LNG) to provide natural gas at uniform delivered price to all naturla gas grid connected urea manufacturing plants for the purpose of manufacturing urea," a ministry order said. "This pooling mechanism will come in to effect from July 1, 2015."

State-owned gas utility GAIL India Ltd has been designated as pool operator for this pooling.

The cost of gas, which is the most important component for production of urea, varies from plant to plant owing to differential rates at which imported LNG is contracted as well as cost of transportation. Gas pooling will help save Rs 1,550 crore in subsidy and will benefit 30 urea plants.

The order said Department of Fertilisers will determine the total requirement of natural gas and draw plant-wide requirement, which would then be informed to the pool operator, GAIL.

The pool operator will tie up imports after considering domestic availability and after averaging out price of both, to deliver the fuel at uniform rate to all plants.

The price of domestic and imported gas will then be pooled or averaged. "On 1st of every month the pool operator will declare a uniform delivered pool price (eg the pool price for the month of July 2015 will be declared by pool operator on July 1)," the order said.

Also, an Empowered Pool Management Committee (EPMC) comprising representatives of oil ministry, department of fertiliser, department of expenditure and GAIL will be formed. This committee would approve the plant-wise gas supplies to be made under gas pool mechanism and LNG purchases.

There are 30 urea producing units in the country, of which 27 are gas-based and three run on naphtha. Out of total consumption of about 30 million tonnes per annum of urea, about 23 million tonnes are produced in the country.

Gas pooling will lead to additional production of around 37.13 lakh tonnes of urea in existing fertilisers units over the next four years. Urea demand during 2017-18 is projected to be about 34 million tonnes and by 2024-25, it is expected to be 38 million tonnes.

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