CCEA may take up proposal to amend urea policy tomorrow

NEW DELHI: The Cabinet Committee on Economic Affairs is likely to take up a proposal tomorrow to amend the New Urea Investment Policy for dropping the 'guaranteed buyback' provision to prevent excess capacity addition.

The policy was notified in January to incentivise firms to invest in the urea sector and reduce dependence on imports.

"CCEA meeting is scheduled for tomorrow. The urea proposal is on the agenda," said a source.

The Fertiliser Ministry has moved a proposal to amend the policy to remove the 'guaranteed buyback' clause, following which the government has received about 13 investment proposals so far entailing capacity addition of 16 million tonne, double the actual requirement.

In order to shortlist companies, the ministry has also proposed including a bidding process.

Urea production in the country is stagnant at 22 million tonnes and the gap of 8 million tonnes is met through imports. So far, about 4 million tonnes of urea has been imported.

Policy guaranteed buyback of urea for eight years from start of production.

In the inter-ministerial consultation, the Finance Ministry has suggested for bidding process, they added.

The government could reduce subsidy bill, projected at Rs 66,000 crore for this fiscal, by shortlisting manufacturers that quote lower cost of production.

Government controls urea sector by fixing MRP at Rs 5,360 per tonne. Difference between MRP and production cost is reimbursed as subsidy to fertiliser companies.

The Ministry wants to provide transparent and objective criteria for giving approval to the proposals received so that only as much capacity is added as is required to meet the demand and supply gap.