With an aim to increase the domestic urea production, the Fertilizer Ministry has notified New Urea Investment Policy for setting up and expansion of urea plants in the country. As per the New Urea Investment Policy, interested private companies are required to give a bank guarantee of Rs 300 crore for every project, while PSUs firms have been exempted from it. However, the companies will get a subsidy on production only if the urea production starts in the next 5 years. The subsidy will continue till 8 years after the commencement of production.
In India, the shortfall between demand and production of urea is around 8 million tonnes which is met through imports. The move to amend the urea policy came after as many as 13 players including IFFCO, RCF and Tata Chemicals proposed setting up of urea plants entailing capacity addition of 16 million tonnes. As earlier policy was assuring the 'guaranteed buyback’, the proposed capacity addition by the applicants was more than the actual requirement. Therefore, the ministry decided to replace guaranteed buyback clause with the Rs 300 crore bank guarantee so that only interested players approach for setting up of new urea projects.
Furthermore, the flexible lower limit and ceiling limit of urea cost has been fixed after factoring the gas price from $6.5 mmbtu to $14 mmbtu. During the implementation of this policy, the decisions on various issues will be taken by a Committee of Secretaries including from Expenditure, Petroleum, Planning Commission and Agriculture.
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