14 December 2012

Cabinet (CCEA) clears new urea investment policy

The Cabinet Committee on Economic Affairs (CCEA) has cleared the new urea investment policy. The new policy offers a remarkable amount of incentives to green field projects (new urea plants) and the projects expanding capacity by existing companies. The new urea investment policy is focusing mainly to increase urea production in the country as there is a huge 8 million tonnes gap in supply demand in urea. Indian urea fertilizer producing companies are producing around 22 million tonnes against the demand of 30 million tonnes. This gap is mainly filled by import of urea from other countries.

The government expects to attract investments worth Rs 35,000 crore to the domestic urea sector after announcing this new urea investment policy. There are at least six new urea plants are lined up and will become operational in 2015-16. This will fill up the demand-supply gap up to 6 million tonnes. The country will be self-reliant in urea once the proposed revival, revamp, expansion and greenfield projects are commissioned.

This new urea investment policy was approved by the Group of Ministers (GoM) in February 2012. However, at that time the industry responded coldly saying that the cap on gas price of $14 per mmBtu for urea plants was not making capacity expansion more attractive.

In the new policy, the fertilizer ministry has recommended 12-20 per cent post-tax return on fresh capital infused by manufacturers for setting up of new plants, expansion and revamping existing ones. To ensure this return, the ministry has decided to cover the entire cost of the natural gas, which is main feed stock of urea accounting for 80 per cent of the total cost.

The government currently controls the urea sector and has fixed a maximum retail price (MRP) at Rs 5,360 per tonne. The difference between the MRP and cost of production is given as subsidy to manufacturers.

The ministry made some changes in the draft policy after inter-ministerial consultation. It proposed covering entire cost of natural gas, while the GoM had favored providing subsidy on gas price within the range of USD 6.5-14 mmBtu.

Stay tuned to Fertilizer News for more news on new urea investment policy !

1 comment:

  1. Arvind Kumar26 December, 2012

    “BIFR after its hearing held on 11 Dec’2012, on an application and objections filed by the IEL Employees’Union(CITU) against deliberate and undue delay by Govt of India,Deptt of Fertilizers in giving permission toKanpur Fertilizers Cement Limited (KFCL) to restat the urea production from Kanpur based erstwhile Duncans closed but revamped fertilizer factory with Naptha as feedstock,, has observed in its order that the industrial & financial reconstruction Scheme once sanctioned by it on January 16,2012 has become sacrosanct, thereforem Department of Fertilizers of Govt of India under the Ministry of Chemicals & Fertilizers are bound to comply with the directions stipulated at the para 15.3(i) of Sanctioned Scheme (SS-12) for the sake of sustainable revival of the company and to submit the compliance report th the Board within 30 days. IELEU gen Secy comrade Arvind Kumar has hoped that the Govt of India Cabint Committee on Economic Affairs (CCEA) will no longer linger in clearing this important issue to avoid action for contempt of court.”