"It is a question of make or buy. Beyond $5 per mBtu, it becomes cheaper to import fertilizer than set up plants," said a Fertilizer Ministry official.

India imported 5 million tons of fertilizer last year. The figure is likely to be higher this year. The Fertilizer Ministry had expressed its opposition to the gas pricing formula Reliance Industries Ltd. had proposed for its gas from the Krishna-Godavari basin at $4.33 and $5.2 per mBtu.

Besides the fertilizer, the Power Ministry had also challenged RIL's gas pricing formula. The matter was referred to a group of secretaries, which submitted its report to the government recently.

The prime minister's office would take a final call on the issue. The Fertilizer Department, which is keen to set up plants abroad, says the gas pricing formula would hit its overseas expansion plans.

If the gas price in India is around $5 per mBtu, at which the Fertilizer Department says it can afford to buy the gas, the cost at which new plants in Nigeria, for example, can buy the gas will be around $2.5 per mBtu.

"We can get gas in Nigeria for less than $3 per mBtu. That will make the plant viable, despite the $3.5 per ton freight and port handling charge," said a Fertilizer Department official.