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Last Updated : Nov 19, 2015 02:59 PM IST | Source: CNBC-TV18

Govt's mkt margin will ease cash flow for urea cos: Zuari

Speaking to CNBC-TV18, Kapil Mehan, MD & group CEO of Zuari Agro Chemicals says that the move will improve cash flows of companies.

The government on Wednesday fixed a maximum marketing margin that firms can charge for selling natural gas to fertilizer and LPG companies. The fixed rate is decided on Rs 200, a 12.5 percent cut from the current rate of Rs 225.

The new rate is meant to enhance transparency and provide an element of certainty for future investments in gas infrastructure sector, the government statement said.

Lauding the move, Kapil Mehan, MD & group CEO of Zuari Agro Chemicals says that regulating marketing margins is a positive for the Urea industry.

The move will improve cash flows of companies. However, he adds, that this would not have much impact on the margin for companies.

Below is the verbatim transcript of Kapil Mehan's interview with Reema Tendulkar and Sonia Shenoy on CNBC-TV18.

Reema: Could you confirm what the new marketing margin will be which has been approved by the cabinet and how does it impact a company like yours?

A: This marketing margin issue has been pending for last six years. Since 2009, when the industry had started taking Reliance gas. Now, I think the government has approved the margin. I have not seen exact details. It is positive for the industry because the past dues will get cleared as well as in future, there will be no uncertainty.

Sonia: What was the marketing margin earlier and now how much could it come down to?

A: Earlier, it was 13 cents and now, there is a proposal to make it Rs 200, so that is a marginal reduction, but that also have not seen the details. So, I do not know what exactly the cabinet has approved.

Sonia: Will the cost for a company like yours fall at all?

A: No, the cost will not fall. As we know that the cost is a pass-through. So, it will not be a fall for the company, it will just be a positive.

Reema: You also said that perhaps a reduction or regulation of the marketing margin will help the company clearing the past dues, could you elabourate on that, what were the past dues?

A: This has been pending since 2009 and lot of money is due to the company.

Reema: So your margins will be unchanged because it is a pass through but cash flows you believe will improve because of this development?

A: Absolutely.

Sonia: What is the quantum of gas that you do get from some of these companies like GAIL?

A: We get about 1.02 billion cubic metres for our Goa plant.

Sonia: And from IGL?

A: There is no IGL gas that we get. It comes from Petronet LNG because they have a contract with Qatar.

Reema: What is the quantum of stuck up subsidies for a company like Zuari as well as for the industry which could get unstuck?

A: I think it will be a few hundred crores for the whole industry. For Zuari, it is not there because we were not using Reliance gas. It was only for the people who were using Reliance gas.

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First Published on Nov 19, 2015 09:32 am
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