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MCF wants subsidy policy to continue

Posted on Sep 05 2014 | IANS

Bangalore, Sep 4 : Mangalore Chemicals and Fertilizers Ltd (MCF), controlled by liquor baron Vijay Mallya, Thursday urged the central government to continue the subsidy policy on naptha-based fertilizer plants.

"The subsidy policy should be continued till Gail (Gas Authority of India Ltd) starts supplying gas to our fertilizer plant at Managalore," MCF chairman Mallya told reporters on the margins of the company's 47th annual general meeting (AGM) here.

Though the company invested Rs.300 crore in setting up the infrastructure, the state-run Gail is yet to completing laying the pipeline to supply gas to the plant in the port city, about 350km from Bangalore off the west coast.

"As Gail is behind schedule in laying the pipeline at least by two years, the government should extend the subsidy till we get natural gas," Mallya said.

Under the new pricing scheme, the then UPA government in March 2007 directed naptha-based plants to convert its energy use to natural gas by March 2010. Delay in laying the pipeline forced the government to extend the deadline till March 2014.

The government, however, specified in April this year that production of high cost of naptha-based urea plants would be allowed under the scheme till June, hoping gas would be supplied by then.

"Though there is no gas supply, the government stopped paying subsidy for our plant since July 1," Mallya said.

The company tied up with state-run marketing firm Indian Oil Corporation and Gail in 2011 for the liquefied natural gas (LNG) supply to its plant from Kochi in Kerala.

While Gail's LNG terminal was commissioned at Kochi year ago, laying of the pipeline to Mangalore through the 420km coastal route has been progressing at snail's pace.

Mallya said absence of a comprehensive fertilizer policy was affecting the industry and there was no clarity on several issues.

Asserting that fertilizer was crucial for the agricultural economy, Mallya said there was urea shortage in the country due to supply constraints, as production stagnated for want of investment in capacity expansion.

"Prolonged delay in subsidy payment is affecting our working capital. Although we have the potential to boost sales, our production capacity is constrained due to inadequate working capital from our bankers," he told the shareholders at the AGM.

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