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New urea policy to boost investment

NEW DELHI: The Union Government on Friday approved a new policy to encourage investment in the urea sector to boost the stagnating production of the crop nutrient and reduce the country’s import dependence. The approval was granted by the Cabinet Committee on Economic Affairs (CCEA) on the basis of the recommendations of the Abhijit Sen Committee.

Briefing the media after the CCEA meeting, Science and Technology Minister Kapil Sibal said the domestic manufacturers would get 85-95 per cent of the international price subject to a price band of $250-425 a tonne in terms of the new norms. The Government is targeting a production capacity 40 million tonnes by 2012 through the new policy by way of expansion and revamp existing units and revival of eight closed units of Fertilizer Corporation of India and Hindusatan Fertilizer Corporation besides greenfiled projects.

The current installed capacity of urea is 21 million tonnes, while the demand has surged to 27-28 million tonnes. The gap is met through imports.

Welcoming the policy, the Fertiliser Association of India expressed the hope that production may improve by three million tonnes in the next two years subject to availability of gas. “The entire thing depends on gas availability and price. If it is available to fertilizer manufacturers at $5 per mmbtu the urea production will go up,” FAI Director General Satish Chander said.

Under the new policy, the additional urea produced from the revamp of existing units would be recognised at 85 per cent of import price parity (IPP). However, the minimum price has been fixed at $250 a tonne and the maximum is $425 a tonne.

Interestingly, the CCEA has left the issue of fixing the price of urea for new (greenfield) units to the Fertiliser Ministry. It has also put a time limit for the revamped, expanded and revived units to avail themselves of the benefit of the scheme.

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