Switch-over to gas feedstock in 3 years; more efficient distribution possible
Scope for cost competitivenessIncentives for additional urea output
NEW DELHI: The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved a new pricing scheme (NPS stage-III) for urea units under which the Centre's permission would not be required for stepping up production beyond the installed capacity of the plants.
The scheme, according to an official statement here, would impart greater efficiency in indigenous urea units and also usher in cost-competitiveness by way of switching over to natural gas as feedstock within three years.
The new scheme would be effective from October 1, 2006, to March 31, 2010, Finance Minister P. Chidambaram told newspersons here after the CCEA meeting.
The scheme, he said, was aimed at encouraging urea production beyond 100 per cent of the installed capacity'' of units by introducing a system of incentives for the additional output, subject to "merit order procurement.''
In effect, the existing provision of prior government permission for additional urea production has been dispensed with.
The NPS stage-III had been formulated in keeping with the recommendations of the working group on urea policy set up under the chairmanship of Y. K. Alagh.
Under the new scheme, for promoting the use of natural gas, a definite time frame has been provided for conversion of all non-gas-based urea units to gas within the next three years. The Department of Fertilisers is to separately notify a scheme for conversion of fuel oil/low sulphur heavy stock-based units to gas.
The scheme encourages the setting up of joint venture projects overseas wherever gas is readily available at reasonable rates. It also seeks to create a specialised agency to coordinate investments abroad in the fertilizer sector.
The Government would continue to regulate the movement of urea up to 50 per cent of production of units while the States would be required to allocate the entire quantity of planned urea arrivals both regulated and deregulated in a district-wise, month-wise and supplier-wise format.
The urea units, on their part, would be required to maintain a district level stock point and the subsidy would be paid only when the fertiliser reached the district.
Monitoring of movement and distribution of urea across the country up to the district level would be done through an online web-based system, the statement said.