Discussing the impact of the development, Neeru Abrol, CMD of National Fertilisers , said the earlier policy lacked clarification on the guaranteed buyback scheme thus it did not see investments. However, the new policy clarifies on that aspect. "Thus, this will make way for the people who want to come and invest in the urea sector," she said.
On the possible divestment of NFL, Abrol said there has been no news from the government with reference to disinvestment during the fiscal. The government currently holds 89.71 percent in NFL.
The company has been mandated along with Engineers India Ltd and Fertiliser Corporation to revive Ramagundam, which will be 1.27 million tonne urea plant and to cost about Rs 4, 700 crore.
"Post clarity on the investment policy, we will be doing the due diligence of the plant and look out for the viabilities," she added.
Below is the transcript of Neeru Abrol's interview to CNBC-TV18's Ekta Batra and Anuj Singhal
Anuj: Have you gone through the new urea policy and would it have any kind of impact on companies like National Fertilisers (NFL)?
A: Actually this policy initially had come in January 2013. There was an issue about guaranteed buyback that was envisaged in that earlier policy which was under reconsideration. So in the new investment policy (NIP) 2012 people didn't come in for investment just because that clarification was not there. Now that clarification has come that guaranteed buyback will not be there but in any case the government will continue to take the urea produced by the companies, on sale they will get the subsidy so that clarity has come. So now this will make way for the people who want to come in and investment into urea sector, they should be coming in.
Ekta: We do understand that the divestment of NFL has been pushed to possibly the next fiscal to consider. Can you just give us more details in terms of whether you have heard from the government, how much the government would possibly be looking to divest and what would be a timeline?
A: Frankly no news is there on that account because at present the government stake is about 89.71 percent. So if it has to come down to 75 percent for the government, then it could be progressively divestment should be there. But we have not got any news from the government that NFL will be going for disinvestment during the current year.
Ekta: Do you have any fresh capex which is lined up by the company which could possibly take advantage of the new urea investment policy?
A: We have been mandated along with Engineers India Limited and Fertiliser Corporation to revive Ramagundam and that is going to be about 1.27 million tonne urea plant and its cost is about Rs 4700 crore. So the clarity on the investment policy we were waiting for it so now with this clarification coming in we will be doing the due diligence and going ahead and seeing what type of viabilities are there and then we will be formally announcing it.
Ekta: Can you throw some light in terms of the revival of the particular plant which is around Rs 4700 crore, how much would NFL be participating in terms of equity or funding within the revival of the plant which will cost Rs 4700 crore and how will the new urea investment policy help you all?
A: In the sense that this is expected to cost about Rs 4700 crore and being in revival so the land and other facilities are already there. So this should be about 2:1 debt equity ratio we will be doing in. So equity is going to be about Rs 1500 crore, in that EIL and NFL 26 percent each we are going to invest and FCIL is going to have about 11 percent.
So the remaining we will be looking forward to tying up for the 37 percent, there could be other investors in it. And now in any case the policy says that we have to complete it in five years so once the policy is announced now we will be going ahead. Somewhere from April 2015 onwards everything should be lined up because the environment assessment is already going on, the study is already going on for that, we should be getting back. The lining up of the contracts also we will be going ahead with the processor licenses. So those discussions are already going on.
Ekta: What would be the feedstock required for the plant?
A: That will be natural gas only and that should be coming because this is in the new Telangana. In any case we will have to go for RLNG only that we should be getting it, the spot gas but discussions are going on for pooling of gas so we expect that the pooling of gas takes place so then the viability will still further improve. Otherwise the payback period we are finding it is about five years because the government continues to give subsidy whatever the gas prices because the policy talks about USD 6.5 and as it goes up then we will get 0.1 mmscmd/dollar if the dollar goes up. So about USD 2 implication will be there in the floor price. So that we will be getting it so that way the policy talks about all the three, whether it is revival, whether it is brown field or even if you have to revamp certain existing units so the policy is talking of all the three aspect that how should we go about it. It is giving the floor and ceiling within that it should be working and if the gas price goes beyond that certain limit USD 6.5 per mmscmd then the floor will go up accordingly.
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