The fertilizer ministry has circulated a proposal to the cabinet in order to remove guaranteed buyback clause in the urea investment policy approved by the Cabinet Committee on Economic Affairs (CCEA) in December last year in order to incentivise manufacturers for raising domestic urea output. The New Investment Policy (NIP) 2012 guaranteed buy-back of urea for eight years from start of production, which has encouraged fertiliser firms applying for setting up new plant or expanding capacity of existing plant led to a flood of applications for expanding capacities.
The present domestic urea production stands at about 22 million tonnes, while the country needs an additional capacity of only 8 million tonnes of urea to become self-sufficient. Therefore, the ministry wants to give approval to some selected applicants so that only as much capacity is added as is required to meet the demand and supply gap.
Fertilizer ministry has received applications from 13 fertiliser firms for setting up new plants or for expanding capacities, which would increase capacities by about 16 million tonnes. Meanwhile, the ministry has introduced bidding process for shortlising 4-5 applicants from among the 13 on the basis of cost of production. The government has currently fixed subsidy at Rs 5,360 per tonne, which is the difference between MRP and production cost. By sorting and allowing low cost fertilizers producers, the government aims to reduce the subsidy bill projected at Rs 66,000 crore for this fiscal.
Among the applications, the major players who have approached the Department of Fertilizers (DoF) for greenfield or brownfield expansion under the NIP include, Tata Chemicals, Indo Global Fertilisers, IFFCO, Chambfal Fertilisers and Chemicals, Rashtriya Chemicals and Fertilisers, National Fertilisers Ltd.
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