Cabinet committee approves production from three naphtha-based urea plants

NEW DELHI: To ensure smooth supply of urea in southern states, the government today approved continuation of its production from three plants that use naphtha as feedstock till availability of gas through pipelines or any other means.

"The Cabinet Committee on Economic Affairs (CCEA) today okayed the continuation of production of urea from Madras Fertilizers (MFL), Mangalore Chemicals and Fertilizers (MCFL) and Southern Petrochemical Industries Corporation (SPIC), using naphtha as feedstock," Fertiliser Minister Ananth Kumar told reporters.

"The decision has been taken to ensure smooth supply of fertiliser in the southern states. The total requirement of Karnataka, Tamil Nadu and Kerala is 23 lakh tonne (LT), and the annual production of these three units is 15 LT per annum."

Under the Modified New Pricing Scheme (NPS)-III, the three units -- MFL-Manali, MCFL-Mangalore and SPIC-Tuticorin -- were allowed to produce urea from naphtha as feedstock till June 30 last year, which was later extended twice by the Cabinet to April 16 this year.

On the basis of NPS-III, the total cost of production of urea or concession price is calculated while the selling price is fixed at Rs 5,360 per tonne.

Of these three companies, MFL is state owned while other two, MCFL and SPIC, are private players.

In 2013-14, the cost of production of urea per tonne from each of these units was more than Rs 43,000 while in the case of units using domestic gas as feedstock, it hovered between Rs 10,000 and Rs 18,000 per tonne.