Fertiliser stocks slump as RIL serves notice to cut gas supply

MUMBAI: Fertiliser stocks today went into a tailspin after reports that Reliance Industries ( RIL) has served a notice for suspension of gas supplies to four fertiliser companies' plants in Uttar Pradesh, effective tomorrow.

Reacting to the news, Tata Chemicals plunged 2.37 per cent to settle at Rs 295 on the BSE. During the day, the stock lost 4.74 per cent to hit a 52-week low of Rs 287.80.

Among other fertiliser companies, Deepak Fertilisers & Petrochemicals Corporation fell by 2.34 per cent, Chambal Fertilisers & Chemicals by 2.28 per cent and Zuari Industries by 3.43 per cent.

Gujarat Narmada Valley Fertilizers Company, too, shed 2.95 per cent, while Coromandel International lost 2.52 per cent.

RIL on October 1 had served a notice for suspension of supplies to plants of Indo Gulf Fertiliser, IFFCO, KRIBHCO Shyam Fertilisers and Tata Chemicals from tomorrow unless they enhance their financial guarantees to cover for state sales tax.

RIL supplies some 4 million standard cubic metres per day of natural gas from its eastern offshore KG-D6 fields to the plants of the four notified companies. Like elsewhere in the country, it has been charging central sales tax of 2 per cent from users in Uttar Pradesh.

The firms, producing about 2 million tonnes of urea from gas sourced from RIL, are against providing financial guarantees through letters of credit for covering liabilities arising out of the levy of local sales tax on gas sales, as it would increase their production costs and subsidy payouts.