Cabinet gives nod to policy supplying natural gas at uniform price to urea plants

NEW DELHI: The Cabinet has approved a policy to supply natural gas at a uniform price to all urea plants, hoping to revive some defunct manufacturing units in eastern India and boost local output. It also approved budgetary support of nearly Rs 5,000 crore for strategic oil reserves and revival of fertiliser units in UP and poll-bound Bihar.

The government said the cost of urea production at pooled price would be lower than the import price, encouraging existing facilities to produce more than their capacity, the government said in a statement.

This will help revive the Gorakhpur, Barauni and Sindri urea plants, which will be the main customers for the proposed Jagdishpur-Haldia pipeline, the government said. The work on this pipeline is expected to start in this financial year.

The government estimated that an additional urea of around 37.13 lakh metric tonne will be produced by existing units over the next four years as a result of price pooling, leading to import reduction and a saving on subsidy worth Rs 1,550 crore. Of the 300 lakh metric tonnes (LMT) urea India consumes annually, it produces about 230 LMT locally and imports the balance.

The Cabinet also approved the revival of the defunct fertiliser manufacturing facilities at Barauni in Bihar and Gorakhpur in eastern Uttar Pradesh, aimed at boosting urea availability in the eastern region.

The Barauni unit of Hindustan Fertilizer Corporation and the Gorakhpur unit of Fertilizers Corporation India, defunct since 2004, "will be revived through bidding route with an approximate investment of Rs 5,000 – 6,000 crore, and create employment opportunity for 500 direct and 2,500 indirect workers," the government said in a statement.

The Cabinet also approved the allocation of Rs 4,948 crore for the gross budgetary support to its strategic crude storage programme in the country. The funds will mainly be used to fill the three strategic reserves India has been building to tide over any unexpected disruption in oil supplies. India imports nearly 80% of its crude requirement and sources from energy-rich regions that are also conflict-prone.

The reserve at Visakhapatnam is ready to be filled, while the underground rock caverns at Mangalore and Padur will be completed by October 2015.