Will have gas connectivity by 2011: FACT

George Sleeba , Chairman and Managing Director of Fact informs that the company will have gas connectivity by 2011 and will run on naphtha till then. He adds that the government has not given indication on fertiliser bonds.

Excerpts from the exclusive interview with George Sleeba:

Q: What have you made of what the minister has said about switching to gas from naphtha and the kind of bonds that he is going to issue prior to end of this month, what are your initial reaction to those comments?

A: As far as we are concerned, we don’t have gas availability in Cochin and we expect to have gas connectivity only by 2011.

Q: So the conversion from naphtha to gas is not something that you would hurry up just yet?

A: For us, the infrastructure has to be built and L&G terminal is being built here in Cochin. That will be operational only by 2011 as per the present estimate. So as of now, we have to go on with naphtha and till that time, we are requesting the government to give us some support. 

Q: How much are you getting by way of fertilizer bonds and what will that do to your bottomline?

A: There is no proposal as far as we are concerned. We are also not able to respond to that because we have not been given any indication as it is.      

Q: The minister has announced that the fertiliser bonds of Rs 4000 crores will be available, what are you expecting by way of fertiliser bonds for your company?

A: As of now our company is not doing well and because of that reason, government has been releasing our subsidy without much delay, so that the company can pull on. So I don’t think these bonds will again affect our working capital position.

Q: The government has said that they are going to give you Rs 200 crore to convert to a gas based plant, could you share with us as to what the total cost will be to change the entire line of operations from naphtha to gas based and is the cost saving involved in the procedure as well?

A: No, this Rs 200 crores is not for conversion to gas, that is not the purpose for which that has being given, or that is being considered by the government. This Rs 200 crore is for rectifying some of the anomalies in our existing subsidy scheme.   

Q: What is the total amount of money it requires to change the scale of operations from naphtha based to gas based?

A: It will take another three years for the conversion to take place. As of now there is no indication that firm date has been given by the Petronet L&Gon its  availablity. We have only got a confirmation that the required quantity of gas will be made available to us.

Q: Is there a significant cost saving that’s involved, why is there a shift from naphtha to gas base? Will a company like yours who are struggling with cash flows right now in turn land up saving money, which can be put to better use through capex and other restructuring exercises?

A: If you convert to gas, definitely there is a cost advantage. We will be able to compete domestically and internationally and that advantage is with us. So everything will depend upon our profitability. Today, we are using naphtha, which is about USD 18-19 per million BTU and L&G will be definitely lower than that. So there will be a saving, but the difference between these two prices will determine how much will be the saving available to the company.