People's Democracy

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.