Cabinet okays National Investment Policy to add fresh 10 million tonnes urea capacity

New Delhi, The government on Wednesday announced a new National Investment Policy for Urea (NIPU-2026) to set up 8-9 new gas-based plants with a production capacity of 10 million tonne to make the country self-reliant in the most widely consumed fertiliser.

The policy, approved in the Union Cabinet meeting, headed by Prime Minister Narendra Modi, will encourage new investments in the urea sector to set up gas-based urea manufacturing units in the country.

The new investment framework is an extension of the 2012 New Investment Policy (NIP) with revisions.


Also Read: Anupam Rasayan signs USD 300 mn LOI with Spain's BasqueVolt for battery chemical supply

Briefing the media after the meeting, I&B Minister Ashwini Vaishnaw said the urea demand is rising five per cent annually and the policy approved today aims to create additional urea capacity of 10 million tonne.

In the last decade, six new urea plants were set up, which helped to reduce the country's dependence on imports. The setting up of 8-9 new plants under the policy will make India completely self-reliant, he said.

The key changes in comparison to NIP-2012 include the separation of fixed and variable costs for greater transparency, the introduction of a viable return on equity (RoE) band with a floor at 12 per cent and a ceiling at 16 per cent, and mitigation of foreign exchange risk through conversion of fixed costs into the rupee after four years based on prevailing exchange rates.

Also Read: Anupam Rasayan signs USD 300 mn LOI with Spain's BasqueVolt for battery chemical supply

"These measures are estimated to result in savings of over Rs 250 crore for each plant established under NIPU-2026 compared to NIP-2012," the ministry said in a statement.

The minister said the country imports around 10 million tonne of urea to meet the domestic shortages. The annual domestic production is around 30 million tonne against the requirement of 40 million tonne.

The objective of the new policy is to become self-reliant in urea amid a rise in demand due to a change in cropping pattern, increased sowing area and record production.

The new policy was felt necessary as the Fertilizers Ministry has received various proposals for setting up urea units.

"The incentive under the policy will be the same for private, government and cooperative projects," he said.

Under the 2012 New Investment Policy (NIP), which expired in October 2019, six new urea units were set up, including four units established through JV companies of nominated PSUs, and two units by the private companies.

At present, there are 33 operational urea manufacturing units with a total reassessed/installed capacity of 26.94 million tonne.