The Hindu Business Line : CCEA may take up phase III of urea pricing today

Advertisement

New Delhi Jan. 31 The New Pricing Scheme (NPS) phase III for urea covering the four-year period from 2007 to 2010 is likely to be placed before the Cabinet Committee on Economic Affairs (CCEA) on February 1.

The new scheme proposes to incentivise urea manufacturers for additional production beyond their official capacities. According to the proposal sent by the Department of Fertilisers, the Government will allow the fertiliser companies to retain a portion of the extra profit generated from extra production. This, however, would be done through adjustment on subsidy payment, officials said.

Extra Profit

For additional production of up to 10 per cent beyond the declared capacity, manufacturers would be allowed to retain 35 per cent of the extra profit while the Government would receive 65 per cent. For production in excess of 10 per cent and up to 20 per cent, the industry's share would go up to 50 per cent and the Government would receive the remaining 50 per cent.

In case the manufacturer is able to produce in excess of 20 per cent, the extra profit would be retained by the company and the Government would forego its share. "This would effectively mean that the Government would provide the entire subsidy which the company would be able to retain. This extra profit would be calculated only on the variable cost since the investment cost for up to 100 per cent capacity utilisation is already been factored into the subsidy element," sources said.

The NPS III also envisages revival of the closed fertiliser plants. This would make available another 40-50 lakh tonnes of additional capacity, officials said.