Thursday, November 24, 2022

As subsidies rise, the government seeks lower gas prices for fertilisers

As subsidy soars, government seeks lower gas price for fertilisers

 NEW DELHI: Faced with rising contracted gas costs following the Ukraine war, the public authority has put suppliers, including a few global giants, on notice and is discussing a mechanism to guarantee better costs for compost plants. The move includes getting an aggregator like GAIL to acquire the fuel on behalf of Indian companies or buying from gas exchanges or going for more limited contracts.Fertiliser plants get gas supplies mainly from three sources — homegrown gas, liquified natural gas (LNG) imports and spot market. In the wake of Ukraine war, the sector is dealing with more exorbitant costs and lower availability.

With a portion of the companies, from which gas had been contracted for a very long time, offering supplies at 2. 5 to multiple times the spot value, the Middle has raised the redflag and started consultations to take a gander at ways to reduce cost for urea units, government sources told.

Also, there have been concerns at the way compost companies deal with the issue of gas cost as the whole weight is passed on to the public authority in the type of an endowment bill. There is some discussion around providing incentives to incentivise companies that contract fuel at better costs.

Given the volatility in international costs, sources said, more limited contracts may be a superior option for companies as weight of fuel cost is passed on to the Middle in way of higher endowment bill.

The move comes as compost endowment is probably going to soar to Rs 2. 5 lakh crore as the public authority has decided to bear the expense, instead of burdening farmers with greater costs.

The finance ministry has also come into the image, along with the compost department and the oil ministry. Various options are being explored, including an arrangement of converse auction for better cost revelation and other bidders for contracts being asked to match the most minimal bid (L1) for supply.

Given the way supplies are being contracted, not normal for in nations, for example, China, the public authority is also exploring the option of getting an element like GAIL to be an aggregator for importing gas. Earlier this week, QatarEnergy signed a 27-year deal to supply LNG to China's Sinopec.

Paris-based think tank OECD on Wednesday said gas costs are expected to remain high one year from now as European nations look to get supplies. "… such endeavors will push up gas costs and reduce the quantities of LNG available external Europe, especially in Asia, with detrimental consequences for a few developing economies," it said.

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