Brazil gas subsidy plan hindered as fiscal concerns mount
By Ana Mano
Nov 29 (Reuters) -A proposal to subsidize the price of natural gas used to produce nitrogen fertilizers may stall because of Brazil's fiscal limitations, Bernardo Silva, executive director of fertilizer lobby Sinprifert, said on Friday.
The group, which represents firms including Mosaic MOS.N, Eurochem and Yara YAR.OL in Brazil, welcomes the plan because it would help reduce the country's heavy dependence on imported fertilizers.
Under the proposal, which was approved by a congressional committee this week, subsidies amounting to 1.7 billion reais ($281 million) would cover the difference between the market price of natural gas and "a reference value" of $4 per million BTUs.
To be competitive, Brazilian nitrogen fertilizer producers would ideally buy natural gas in the range of $4 and $7 per million BTUs, Silva said, citing studies. The current price range is between $12 and $16.
Brazil, an agriculture powerhouse, imports about 85% of all crop nutrients its farmers need from Russia, China and Canada, among others.
Petrobras PETR4.SA, the state-run energy company which announced plans to re-enter fertilizer production, could also play a key role in lowering domestic gas prices.
The company currently reinjects gas extracted from wells into reservoirs, maximizing oil production. But by reducing the reinjection rate, Petrobras could boost internal supplies of natural gas and still be profitable, he said.
Aside from expensive gas, Brazil's current tax regime favors overall fertilizer imports to the detriment of internal production, Silva said, with little to suggest short-term changes.
For example, a recent proposal to impose import tariffs on ammonium nitrate, used to make certain crop nutrients, was withdrawn after pushback from domestic farm lobbies, Silva said.
Defenders of the move said it was a way to level the playing field, but the domestic agriculture lobby feared it would make certain fertilizers costlier.
($1 = 6.0500 reais)
Reporting by Ana Mano; editing by Jonathan Oatis
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