New Delhi: To maintain domestic production of urea in the country, Fertilizer Ministry will soon move a Cabinet note for continuation of subsidy to three closed naptha-based urea plants, including that of a UB Group firm.
These plants have been shut for about two months after the government discontinued subsidy on urea produced from costly naptha as feedstock with effect from October 1.
A proposal to reinstate the subsidy follows demands from Karnataka, where one of the three plants -- that of Vijay Mallya-led UB Group firm Mangalore Chemicals & Fertilisers (MCFL) -- is located.
The other two plants belong to Madras Fertilizers and Southern Petrochemical Industries Corporation (SPIC).
"The Karnataka Chief Minister Siddaramaiah requested for restarting the MCFL, I explained him the subsidy burden as urea's cost of production using Naptha as feedstock is around Rs 40,000 per tonne, whereas in case of gas it is around Rs 15,000 per tonne. We will propose to Union Cabinet to consider this issue," Fertiliser Minister Ananth Kumar said.
"I have also requested the Chief Minister to waive off the VAT on Naptha so that subsidy could be reduced," Kumar added.
The gas pipeline infrastructure to MCFL has not yet been set up, prompting Karnataka to demand for continuation of the subsidy for this company's plant.
In August, the Cabinet Committee on Economic Affairs (CCEA) had approved continuation of production of urea from Madras Fertilizers, MCFL and Southern Petrochemical Industries Corporation (SPIC), using naptha as feedstock for a duration of three months ending on September 30.
Kumar said the proposal would be moved to Cabinet as the objective is to maintain the current domestic production level of urea in the country.
Meanwhile, MCFL is the only fertilizer plant in Karnataka and is takeover target of Deepak Fertilisers and Zuari Group.
On October 1, MCFL had informed BSE that the plant has been shut from October this year due to expiry of permission given by the government for production of farm nutrient from high cost feedstock naptha.
Earlier this week, main promoter Vijay Mallya resigned as director from his group firm MCFL, but no reasons were given.
In the battle for control of MCFL, Mallya had sided with Zuari group and launched the counter open offer to ward off the takeover bid of Deepak Fertilizers.
After the open offers of both Deepak and rival Zuari-UB group closed on October 20, Deepak Fertilisers' stake in MCFL increased by about 6 percent through an open offer to about 32 percent and inched closer towards the rival Zuari-UB group's combined stake of 38.4 percent.
