17 urea plants closed, 11 may shut shop on fuel supply cutoff

http://economictimes.indiatimes.com/News/News_By_Industry/Indl_Goods__Svs/17_urea_plants_closed_11_may_shut_shop_on_fuel_supply_cutoff/articleshow/3949144.cms

8 Jan 2009, 0016 hrs IST, Prabha Jagannathan, ET Bureau

NEW DELHI: Urea production in the country has ground to a virtual standstill with 17 out of a total 28 urea plants, mainly on the HBJ pipeline, shutting down in the wake of the strike by key sector PSUs ONGC and GAIL. The development has thrown the fertiliser sector into a tizzy, and the crucial Rabi output in the short term, and food security in the longer term, into jeopardy.

At least 13 of the units are on the HBJ gas pipeline while the rest are stand alone units. Worse still, there is strong apprehension, that if the Gail/ONGC strike continues beyond a few days, other units running on Fuel Oil (FO) and naphtha, which produce nearly 6,000 tonnes of urea per day, could also be affected since HPCL, BPCL and IOC officials are also on strike. The fertiliser companies which have closed down their production completely are Kribhco (Hazira unit), NFL (Vijaipur unit), CFCL (Gadepan), Iffco (Aonla, Phulpur), Indo-Gulf (Jagdishpur), KSFL (Shahjahanpur), TCL (Babrala), GSFC (Vadodara) and RCF (Thal).

Among the fertiliser units that have closed down but are not on the HBJ gas pipeline are those of the GSFC, RCF, Iffco (Kallol) and Nagarjuna Fertilisers . Eight more urea units are those that run on Fuel Oil (FO) and naphtha and could close down if the strike persists.

Together, the units belonging to 10 fertiliser companies, manufacture nearly 43,000 tonnes of urea per day at a cost of Rs 60,000-62,000 crore-odd daily. “Already, the sector has footed a net loss of Rs 45-50 crore on account of the shutdown and the losses will mount for the fertiliser sector which is already under poor investment pressure, if the strike persists,” sectoral experts contend. The restarting of plants following the current shutdown itself costs a whopping Rs 1.5 crore. Normally, fertiliser units shut down their plants only in the agriculturally lean season of April/May for repairs etc .

“This is happening at a time when demand for urea is peaking and is bound to have severe impact on agricultural production in the Rabi season. It will add further to the farmers’ woes. We can ill afford a strike of this nature at this crucial juncture and the sooner the authorities take appropriate measures to remedy the situation, the better for us,” a senior official from the Fertiliser Association of India (FAI) stressed.

Director General of the organisation Satish Chander emphasised: “Wheat sowing is over in October/November and at sowing time, the demand is highest for phosphatic fertilisers such as DAP. But in the growth season, the Rabi staple needs 3-4 applications of urea in addition to cold, frost-free weather, in order to flourish. If urea supply is choked at this juncture, there is every possibility of the crop output and quality being affected. That will adversely impact food security.”

What makes the standstill in urea production, at this key juncture in the Rabi season, highly worrisome is also the fact that the government is hoping for a record-breaking 80 million tonne plus output of wheat this winter to prop up its food buffer stocks in the run-up to the general elections by mid-2009. In anticipation of a higher output, an additional one million hectares were to be brought under wheat acreage alone this Rabi, translating to more than two million tonnes of wheat.

On an average, it is construed that one lakh tonne of urea applied translates to around an additional six lakh tonnes of output. Given that, not just overall output of key Rabi crops, but also the yield per hectare is expected to be affected if the urea production is shut down and supply constraint to farmers persists. Although there has been record rice/paddy procurement this year and the Central grain pool is well stocked for both TPDS and welfare needs, the government cannot take a risk on the foodgrain front, particularly in view of persistently high prices.

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