Government invites fresh proposals for new urea plants

NEW DELHI: The Fertilizer Ministry has invited fresh proposals for setting up urea plants as well as increasing the capacity of existing ones under the recently notified New Urea Investment Policy for increasing domestic production.

In February, the Cabinet had approved amendments in the policy after 13 players including IFFCO, RCF and Tata Chemicals proposed new urea plants entailing capacity addition of 16 million tonne.

The annual demand of urea in the country is around 30 million tonnes, whereas the domestic production is around 22 MT. The rest is met through imports.

"The new urea investment policy has already been notified and now we have invited fresh proposals from the companies for setting up or increasing their current capacity," a source said.

The ministry has also written individually to all those 13 companies, which had applied earlier under the policy, to reconfirm their interest under the amended urea policy, said the source.

Decisions on various issues during the implementation of this policy, including approving proposals for setting up of urea capacity, will be taken up by a Committee of Secretaries including from Expenditure, Petroleum, Planning Commission and Agriculture.

Fertilizers Secretary will be Chairman of the committee. According to the policy, interested private companies are required to give a bank guarantee of Rs 300 crore for every project, although PSU firms have been exempted from it.

The companies will get a subsidy only if urea production starts in the next 5 years, and it will continue till 8 years after the commencement of production.

Sources also added that as per the policy the flexible lower limit and ceiling limit of urea cost has been fixed after factoring the gas price from $ 6.5 mmbtu to $ 14 mmbtu. These provisions were made in the policy before the government decided to raise the gas prices from April 1, 2014.

Urea is an essential commodity and its retail price is fixed at Rs 5,360 per tonne. The difference between the cost of production and the selling price is paid as subsidy to the manufacturers.