Cost pressure on fertiliser companies to increase if natural gas is not made available to them

Fertiliser companies are staring at heavy losses if they are denied natural gas from Reliance Industries. RIL is producing 40 million metric cubic metres per day (MMCMD) of natural gas. Anil Ambani has also made a claim of 28 MMCMD per day. NTPC has also claimed 12 MMCMD to run its 4,000 MW power project. That will leave fertiliser companies with no input from Reliance Industries.

Fertiliser companies having annual capacity of 7.5 million tonnes based on natural gas could be hit by a major crisis if they are not given natural gas, which is used as a fuel and raw material. On an average, about 950 to 1,000 cubic metres of gas is used for each tonne of fertiliser. Around 20% of natural gas is used as feedstock and 80% is used as a fuel. 

In fact, the Government of India, in its policy decision, insists that fertiliser industry is the first priority for natural gas industry. According to Rashtriya Chemicals & Fertilisers (RCF), Mumbai, public sector fertiliser companies use 20 MMCMD of natural gas. On the question of what impact would be there if RCF is not given any gas allotment, RCF CEO, US Jha, refused to make any comment as this matter will be discussed in the Supreme Court.
 
Already eight fertiliser units are closed in Barauni, Sindri, Haldia, Gorakhpur, Talchar, Ramgundm, Korba and Durgapur. If gas is not made available to fertiliser companies, more units may see closure and that may in turn see sharp rise in fertiliser subsidies. Fertiliser subsidies were around Rs 46,000 crore in 2007-08 and are likely to cross Rs 1,00,000 crore this year.
 
In addition to natural gas, fertilisers can be made from heavy oil and coal. Heavy oil and coal options are very expensive as compared to natural gas. Heavy oil conversion to fertiliser plant will consume 30% more energy and coal conversion to fertiliser plant will consume 70% more energy. Investment cost in heavy oil and coal plants are also very expensive. Heavy oil plant is 40% more expensive and coal based plant is 140% more costly. Production cost as compared to the cost of natural gas is also very high. Heavy oil plant production cost of fertiliser is 20% more and for coal it is 70% .  So if natural gas is not made available to fertiliser plants, cost pressure on other options will create huge losses to the country. 
 

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TV18 blames the Union Budget for poor second-quarter performance!
Elections are the most coveted event for TV news channels and Union Budgets are what business TV channels look forward to. Their viewership shoots up on those occasions—it’s no wonder that TV channels advertise heavily the coverage of Union Budget as an event. That is when they hope to rake in the moolah. This is widely known to the investor community. Therefore it comes as a shock that CNBC blames the just-released poor performance of its September quarter on the Union Budget of July. Raghav Bahl, managing director, Network 18, has said just this in an interview to his own channel.
 
“Unfortunately, the last quarter was a quarter in which we had a budget and we also had a couple of competitive launches in that quarter. So, our cost level has also gone up,” said Bahl to CNBC. In September 2009 quarter all business news channels broadcasted both these events with much fanfare. If revenues don’t come from such mega events why does CNBC advertise them so much?
 
In the March quarter when TV18’s news operations reported a 36% decline in revenues of its news broadcasting business, IDFC-SSKI had blamed the poor performance on the fact that time there was no Union Budget which is normally held in February and boosts the March quarter results.
 
TV18’s news operations reported a loss of Rs33.10 crore for the September quarter which takes the loss in the first half to Rs61.38 crore. Loss for the year ended March 2009 was Rs166.36 crore. The news operation was the only bright spot in an array of lossmaking businesses of the TV18 group— Newswire, Web business and Infomedia—until 2008.

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L&T’s loud thinking

L&T’s claim that it will build mega-nuclear plants each year with 3,000MW-4,000MW capacity seems far from reality

In some sections of the press, AM Naik, chairman, L&T, has been quoted as saying that the company is planning to build 3,000MW-4,000 MW nuclear plants every year. The projection seems to be too big. Considering an average price of Rs 8 crore for each MW, a 3,000MW nuclear plant will cost Rs 24,000 crore and a 4,000MW one will cost Rs 32,000 crore. In fact, power industry equipment (without power transmission) contributes less than Rs500 crore to L&T’s annual turnover of Rs 34,000 crore. D Morada, head, corporate communications, L&T, clarifies that “the company has entered into joint ventures with Mitsubishi, Japan for supercritical boilers and steam turbines for thermal power plants.” He further confirms that these JVs (4000 MW/year) will generate revenue from next financial year 2010-11. For this, the company has installed capacity of 3,000MW-4,000MW at its Hazira complex.
 
A nuclear plant usually takes around eight years to build. The gestation period is comparatively long as compared to thermal power plants. Morada says that revenues from the power industry will “leapfrog from 2010-11.”
 
The company has also said that they have developed plasma reactors. However, plasma reactors are still at the experimental stage. Till now there has been hardly any sustainable success in these types of reactors. The largest research project is being carried out at the International Thermonuclear Experimental Reactor (ITER) in France at the cost of $12 billion. India is also one of the participants in this project among seven other countries developing thermonuclear reactors. India has earlier done one experimental plasma reactor, Tokomak—code-named named ‘Aditya’.
 
Morada adds, “Plasma reactors are still the subject of research. L&T has contributed to the Tokomak plasma reactor in India.” He further says that L&T is likely to get a “one-time opportunity in ITER which will go beyond 2025.”
- Dhruv Rathi ([email protected])

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