The Hindu Business Line : New urea policy fixes floor price at $250 a tonne

New Delhi, Aug. 8 Paving the way for increasing indigenous production of urea, the Government on Friday announced new import price parity (IPP) linked subsidy policy for production of additional urea by the domestic manufacturers over and above their current rated capacities.

The new policy, approved by the Cabinet Committee on Economic Affairs (CCEA) on Friday, has set floor and ceiling prices linked with the IPP and the subsidy payable to the producers will be calculated based on these two prices.

Briefing reporters after the meeting, the Minister for Science & Technology, Mr Kapil Sibal, said that the floor price is fixed at $250/tonne and the ceiling is fixed at $425/tonne.

Explaining the applicability of the floor and ceiling prices, officials in the Department of Fertiliser (DoF) said that for producers, if their production cost is less than $250 a tonne, their compensation would still be calculated on the basis of the floor price, and here theystand to gain.

On the other hand, if the cost of production is more than $425, thecompensation would still be computed on the basis of the ceiling price. As long as production cost is within the range, the subsidy will be based on actual cost.

Subsidy rates

The subsidy rates for urea produced through different routes have been fixed at three levels. For additional urea produced through revamp of existing units, the subsidy would be 85 per cent of the IPP.

Urea produced through brownfield expansion at existing locations would attract a higher subsidy rate of 90 per cent of IPP.

The closed units of Hindustan Fertiliser Corporation Ltd and Fertiliser Corporation of India Ltd that are being revived will attract 95 per cent subsidy, according to the new investment policy based on the recommendations of Dr Abhijit Sen Committee.

JVs abroad

For greenfield projects, the Government would seek competitive bidding. Simultaneously, the policy also envisages promoting joint venture projects abroad through firm offtake contracts with pricing decided on the basis of prevailing market conditions and in accordance with the pricing principle recommended by the Sen Committee.