The Telegraph
Since 1st March, 1999
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Fertiliser firms seek better gas pricing deal

New Delhi, Dec. 3: Fertiliser companies have asked the government to intervene in negotiations on gas pricing and get oil companies to sell natural gas to them at $3 a million BTU (British Thermal Units) or be prepared to pay the difference as subsidy.

Currently, oil companies have been demanding $3.92 a million BTU for supplying gas feedstock within Gujarat and $4.2 a million BTU outside the state through the HBJ pipeline.

Reliance, the other big potential gas supplier, has kept its cards close to its chest and will, in all likelihood, set its prices once the negotiations are completed.

“We have told the government that it will have to compensate us in case we don't get gas at a competitive rate of $3 a million BTU,” Fertiliser Association of India chairman R. S. Gehlot said. “We won't be viable otherwise and may have to close down units,” he added.

The industry's claim that it will not be viable otherwise is seen by most officials connected with the group of ministers set up to look into gas pricing as a tactic to get the best deal possible.

The association says it has worked out the $3 figure based on global competitive pricing and taking into account the cost of transporting fuel to India and piping it down to their factories. On the other hand, oil companies also contend that their pricing has been extremely transparent.

The government wants to end fertiliser subsidy payouts as it has been eating into its budget in a major way and it is being increasingly viewed as a subsidy that helps make fertiliser manufacturers profitable and not to farmers who are supposed to benefit from it.

The government faces a Rs 50,000-crore food and fertiliser subsidy bill this year and has been trying various ways of cutting it down, including getting fertiliser firms to switch to gas as feedstock instead of naphtha.

In a speech delivered in Parliament earlier this year, finance minister Jaswant Singh had made it clear that the government could not continue to subsidise fertiliser firms as some of them were claiming as much as Rs 16,000 a tonne as production costs through a complex system of price calculations in order to snap up government subsidy.

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