Reliance Industries and fertiliser companies finally managed to call a truce after government intervention . RIL will have to continue to supply gas at USD 4.20 per mmBtu for now.
For RG Rajan, CMD, RCF this is great news. He says had the gas price been raised to USD 8.30 per mmBtu, the company's working capital requirement would have gone up by Rs 1000 crore.
For now, it is an interim agreement to make sure that Reliance Industries does not stop supplying gas to the fertiliser firms.
RCF's subsidy due as on date is Rs 1600 crore. The fertiliser company has already received Rs 3,000 crore from the government, but still Rs 1,600 crore is pending. Total due was Rs 4,000 crore. He expects to receive the remaining amount in April.
RIL had said that it would stop supplying gas to fertilizer companies at 6 AM today if the new gas price deal at higher price – USD 8.30 per mmBtu – is not signed, which was unacceptable to fertilizer companies. Oil Ministry sources had indicated that RIL wanted higher gas price from fertiliser companies retrospectively. RIL had also sought the difference between new price and USD 4.20 per million British thermal units from April 1.
Below is the verbatim transcript of RG Rajan's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Could you give us your view on the fact that RIL may continue to supply gas at this USD 4.2 per mmbtu rate, what would be the effect of that on RCF itself?
A: Definitely it is a welcome news that gas will be at USD 4.2 per mmbtu for a few more months. If the gas has gone to USD 8.3 per mmbtu or USD 8.4 per mmbtu, our working capital requirement would have gone up by Rs 1,000 crore.
Latha: To put the year that was in perspective, how much of subsidy was due to you, how much did you get in cash from the government?
A: Yes, subsidy total due as on date is Rs 1,600 crore and as on date, we have received around Rs 3,000 crore subsidy.
Latha: You mean you see much more than what was due to you?
A: No. I am saying our total due was around Rs 4,000 crore.
Latha: So Rs 1,600 crore is still left to be given. There was no bank guarantee, no arrangement at all for Rs 1,600 crore?
A: I think now that the New Year has come from the fresh allocation, we will get the balanced subsidy payment.
Latha: But it might take until what a quarter to get this money?
A: We should get it in the month of April.
Latha: So what is the increased working capital cost because of the delayed payments?
A: Around Rs 100 crore is the impact on the interest.
Latha: And that the government doesn't subsidise?
A: No, it doesn't subsidise.
Sonia: You said that there is a near-term relief because it has come in at USD 4 per mmbtu but can you tell us every USD 1 rise in natural gas prices, how much does it increase the industry input cost?
A: Roughly for every USD 1, it will go up by Rs 300 crore.
Sonia: But does this rate matter in the longer run for you in terms of your profitability itself because this is a pass through, right?
A: Yes, it is a pass through for urea but it is not pass through for the P&K fertilizers and also chemical sector.
Latha: So you will have to raise prices over there?
A: Yes, for the chemical sector and the P&K fertilizers, there maybe some impact on the prices.
Latha: So there will be a possibility of lower volumes because of that?
A: Maybe let us see.
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