With the lowering of the domestic gas prices to US$ 4.20 /mmbtu (on NCV basis) for H2 FY 16 and also expected fall in the long-term R-LNG prices from the current levels of US$ 13.5/mmbtu, the pooled prices for fertilizers is likely to reduce to US$ 9.1-9.3/mmbtu during H2 FY 16 from US$ 9.8-9.9/mmbtu during June-July 2015.
8This should lower the cost of production of urea, which in turn would reduce the subsidy burden for the Government. For a fall of every US$ 1/mmbtu in gas price, the retention price of urea would reduce by Rs. 1800-2000/ ton.
8Hence, expected reduction in the pooled prices to US$ 9.1-9.3 should lead to subsidy savings of ~Rs. 12-13 billion for the Government for H2 FY 16 (assuming the currency to remain stable).
8Lower subsidy for the industry would in turn lead to lower working capital borrowings for the companies and enable them reduce their interest cost.
8Further, lower pooled gas prices would favourably impact the profitability of revamped urea capacities earning IPP- based pricing.
8Also, the profitability of producers of non-urea fertiliser such as ammonium nitro-phosphate, which are produced using domestic gas would improve.
8Additionally, chemicals manufactured by integrated fertiliser-chemicals complexes may also witness improvement in profitability as cost of production will decrease while their prices are generally driven by international prices of these chemicals.
For more details visit indianpetroplus.com
8This should lower the cost of production of urea, which in turn would reduce the subsidy burden for the Government. For a fall of every US$ 1/mmbtu in gas price, the retention price of urea would reduce by Rs. 1800-2000/ ton.
8Hence, expected reduction in the pooled prices to US$ 9.1-9.3 should lead to subsidy savings of ~Rs. 12-13 billion for the Government for H2 FY 16 (assuming the currency to remain stable).
8Lower subsidy for the industry would in turn lead to lower working capital borrowings for the companies and enable them reduce their interest cost.
8Further, lower pooled gas prices would favourably impact the profitability of revamped urea capacities earning IPP- based pricing.
8Also, the profitability of producers of non-urea fertiliser such as ammonium nitro-phosphate, which are produced using domestic gas would improve.
8Additionally, chemicals manufactured by integrated fertiliser-chemicals complexes may also witness improvement in profitability as cost of production will decrease while their prices are generally driven by international prices of these chemicals.
For more details visit indianpetroplus.com
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