Nagarjuna complains about high cost of naphtha

Vol 9, PW 11 (08 Sep 05) Midstream & Downstream

Its not a moment too soon: fertiliser companies, hurt by the soaring price of liquid fuel, have begun complaining to the oil ministry about the high cost of naphtha.

One such company is Nagarjuna Fertilisers and Chemicals, which has a factory in Kakinada producing 1.2m t/y of urea. Nagarjuna desperately needs more gas to maintain current production levels and on 12th August took the unusual step of writing to the oil ministry with an (blindingly obvious!) explanation of why naphtha is not a viable long-term alternative to gas for the production of urea.

Consumption of naphtha results in higher requirement of working capital and additional interest burden, argues Nagarjuna. Further, due to the usage of naphtha, the subsidy burden on the Department of Fertilisers also goes up.

Adds the note: Beyond a level it would not be possible to substitute naphtha in place of gas in our existing system. If adequate gas is not made available, it would lead to limitations in the manufacturing capacity of the plant.

Nagarjuna already burns 600 tonnes a day of naphtha at its plant but, like other fertiliser companies, is under pressure from Delhi to switch entirely to gas by April 2006, before the introduction of a new fertiliser policy. According to Nagarjuna, future government policy will make it mandatory for all fertiliser plants to switch from liquid fuel to gas, making it imperative to increase the supply of gas fast.

Nagarjunas position is particularly bleak. It needs 2.75m cm/d to run at full capacity and has been promised of 2.14m cm/d as a firm allocation from GAIL and 610,000 cm/d as a fall-back allocation.

But GAIL only manages to supply it between 1.8m and 1.9m cm/d and has told Nagarjuna that this will reduce further to 1.5m cm/d by December this year and to 1.2m cm/d by April next year.

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