(INFRALINE) — Independent Power Projects (IPPs) and fertiliser companies are likely to face tough times following a 35% jump in naphtha prices over the last six months. Naphtha is used as a feedstock for producing ethylene, propylene and fertilisers, and as a fuel for power generation.

Naphtha prices have risen from a low of Rs 12,500 per tonne to over Rs 18,500 per tonne in the last six months due to OPEC production cuts, the war in Iraq and low oil inventories around the world. (US$1=Rs45).

Ironically, there is no shortage of naphtha in India. Analysts say Indian naphtha demand is down 10% in last four months. The Reliance refinery at Hazira produces up to 4 million tonnes of naphtha a year which it exports to Japan, Taiwan, South Korea, Thailand, Malaysia and Singapore. IOC has been facing excess naphtha stocks for the past two years.

Most private power companies operating in the western region have the capacity to use both oil and natural gas. Some IPPs have tied up gas supplies and may not feel the pressure from rising naphtha prices.