GoM recommends increase in fixed costs paid to urea manufactures by Rs 350 per tonne

31 Jan 2014 Evaluate

A Group of Ministerial Panel (GoM) has recommended increase in fixed cost paid to urea manufactures by Rs 350 per tonne. Meanwhile, there will be no increase in the rate of crop nutrient for farmers as the additional cost of Rs 900 crore will be endured by the government. Earlier, Fertiliser Ministry had moved the proposal for modified New Pricing Scheme (NPS) III, under which the Ministry calculated production cost of urea to pay subsidy and had proposed to raise the fixed cost of urea by Rs 350 per tonne. Now, the proposal would be moved to Cabinet Committee on Economic Affairs (CCEA) for consideration.

According to the proposal, the fixed cost of urea produced by plants which are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne. The base year for calculating fixed cost of urea has been changed from 2002-03 to 2008-09 and minimum fixed cost would be Rs 2,300 per tonne . Further, this scheme would remain applicable for one year from the date of notification. Fixed cost for a urea plant mainly includes repair & maintenance, salary & wages, contract labour and selling expenses. However, the proposed urea fixed cost at Rs 350 per tonne subsidy is lower than the industry demand at Rs 700 per tonne by using 2011-12 as the base year. The government introduced the New Pricing Scheme (NPS) Stage-III for urea units in 2007 and was originally effective from October 2006 to March 2010. Now, the scheme has been extended for three more years and was based on cost of production with 2002-03 as the base year.

India produces about 22 million tonnes (MT) of urea annually and also imports around 8 MT to meet the domestic total requirements. Currently, Indian fertilizer industry is struggling with acute liquidity crunch on account of high production costs. So far this fiscal, the government has allocated Rs 70,586 crore funds to Department of Fertiliser (DoF) as against the total demand of Rs 1,05,497 crore for the 2013-14 fiscal. Commodity wise, a subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilisers.

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GoM recommends increase in fixed costs paid to urea manufactures by Rs 350 per tonne

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