Cabinet approves new urea investment policy to set up 8-9 gas-based plants

New Delhi: The Union Cabinet Wednesday approved the National Investment Policy for Urea-2026 (NIPU-2026), a new framework to encourage investment in gas-based urea manufacturing units to boost domestic production.

The policy will help in setting up 8-9 new gas-based plants with a production capacity of 10 million tonnes aiming to achieve the goal of self-sufficiency under the Aatmanirbhar Bharat initiative, the government said in a statement. The new policy introduces several changes over the earlier New Investment Policy (NIP)-2012. The investment window of the old policy ended in October 2019.

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The new policy separates fixed and variable costs in pricing framework. It introduces a return on equity (RoE) band with a minimum of 12% and maximum of 16%. It also addresses foreign exchange risk by converting fixed costs into rupees after four years based on the prevailing exchange rate.

The government said these changes will improve transparency and save more than ₹250 crore for every plant set up under NIPU-2026 compared with projects approved under NIP-2012.

At present, there are 33 operational urea manufacturing units with a total installed capacity of 26.94 mt. In the last decade itself, six new urea plants were set up, which helped to reduce the country's dependence on imports.

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"India's urea consumption is around 40 mt, while domestic production presently is close to 30 mt. The balance comes from imports. The new policy will help bridge that gap and make the country self-reliant in urea," information and broadcasting minister Ashwini Vaishnaw told reporters.

The closure of critical trade routes such as the Strait of Hormuz triggered an input cost escalation and logistical disruptions in the initial days when manufacturers either had to suspend production or scale it down. The government had to work hard to procure LNG for domestic manufacturing of urea to resume production at the usual rate.

"By encouraging significant new investments in domestic urea manufacturing, the policy has the potential to reduce import dependence, enhance supply reliability and create a more sustainable foundation for India's food production ecosystem," said Satyam Shivam Sundaram, partner, government and public sector, EY India.