Even as two competing open offers for Mangalore Chemicals and Fertilisers (MCF) shares opened on Wednesday, the Vijay Mallya-controlled fertiliser company said its urea plant has been shut from October 1 because the government deadline for stopping subsidy to plants using naphtha as feedstock has lapsed. Fuel conversion at the MCF plant, from naphtha to gas, has been delayed since the Kochi-Mangalore GAIL pipeline is still being built.
The government had extended the initial deadline for existing naphtha units to convert to gas till June 2014, beyond which the subsidy for naphtha-based plants was to be stopped. It later approved production of urea under subsidy at these plants for a further three months, until September 30. The subsidy covers around 88% of the cost of fertiliser, and the company cannot afford to run operations without it, said an MCF official.
?The company has taken up this matter suitably with government of Karnataka and department of fertilisers, government of India, to extend this deadline till gas availability is ensured at Mangalore; the government of India decision awaited,? MCF had said in its annual report for FY14.
MCF signed a gas supply agreement with Indian Oil Corporation and a gas transmission agreement with GAIL (India) in 2011. The LNG terminal at Kochi was commissioned in September 2013. But with slow progress in the completion of the Kochi-Mangalore pipeline, gas delivery at Mangalore is expected only in 2016-17, according to the fertiliser firm.
?MCF has already invested about Rs 300 crore in converting naphtha feedstock to gas feedstock. So, we are absolutely ready. We have requested the government to continue the subsidy policy on naphtha-based plants till such time GAIL provides us with gas,? MCF chairman Vijay Mallya had told reporters at the company’s annual general meeting on September 4.
MCF is the only manufacturer of fertilisers in Karnataka and about 60% of its products are sold in the state.
