Fertilizer sector is a major consumer of natural gas in the country as it uses gas as feedstock in urea manufacturing. The major feedstocks presently used in the fertilizer plant are natural gas, naphtha and fuel oil / LSHS and cost of feedstock varies from 65% to 87% of production costs. Since natural gas is one of the most cost effective fuels for fertilizer plants, gas based fertilizer (urea) production accounts for more than 66% of the total fertilizer production. Naphtha and FO/LSHS based production accounts for the balance production.
However, unavailability of domestically produced natural gas has long been plaguing the Indian fertilizer industry over the years and forcing fertilizer companies to buy costlier naphtha/RLNG resulting in higher urea production cost and subsequently spiraling fertilizer subsidy.
Commencement of natural gas from RIL operated KG D-6 block has bring a big sigh of relief for urea manufacturers as well as the Government, as the urea manufacturing companies have collectively been allocated 15 mmscmd of natural gas. The present allocation has satisfied the present gas requirement of fertilizer sector and thus reducing the subsidy burden of the Government.
During 2009-10, the fertilizer sector was supplied about 4360 mmscm or 12.24 mmscmd natural gas on an average from RIL’s KG D-6 block. Back-to-envelope calculation indicates that supply of 12.24 mmscmd of natural gas from KG D-6 block has helped produce 6.10 million tonnes of urea and, thus, saved the Government nearly Rs 3,100 crore.
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