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The new urea pricing policy is likely to result in savings in subsidy expenditure and promote the efficient use of scarce energy resources, the Minister of State for Chemicals and Fertilisers, Dr Chhattrapal Singh, said.

NEW DELHI, Feb. 14

THE main objective of the new pricing policy for urea manufacturing units, which comes into effect from April 1 this year, is to bring in greater transparency, uniformity and efficiency in subsidy payments to the fertiliser companies. Besides, it is also to encourage them to take measures on their own to promote efficiency and bring down the cost of production.

The new pricing policy is likely to result not only in savings in subsidy expenditure but also promote the efficient use of scarce energy resources, the Minister of State for Chemicals and Fertilisers, Dr Chhattrapal Singh, told members of the Parliamentary Consultative Committee attached to his Ministry.

The new scheme, he said, would be implemented in stages. Stage - I would be for one year from April 1, 2003, to March 31, 2004 and Stage - II would be for two years, from April 1, 2004, to March 31, 2006 while the modalities of Stage - III is to be decided after review of the implementation of the first two stages.

Elaborating on the salient features of the policy, he said there would be six groups based on vintage and feedstock for determining the group-based concession under the new scheme, namely, pre-1992 gas-based units, post-1992 gas-based units, pre-1992 naphtha-based units, post-1992 naphtha-based units, fuel oil/ low sulphur heavy stock (FO/LSHS) based units and mixed energy based units.

The mixed energy-based group includes such gas-based units that use alternative feedstock/fuel to the extent of more than 25 per cent as admissible on April 1, 2002. Classification of units among different group so determined shall not be changed during the first two stages.

The Minister said that the rates of concession for the units in each group would be determined in two steps. In the first step, the weighted average retention price and dealer's margin of the units in the respective group as applicable on April 1, 2002, is to be computed.

Units having exceptionally high or low retention price, i.e., deviation of 20 per cent and above with reference to group average computed in Step-1 are to be treated as outliers in their respective groups. In step-2, the final weighted average group retention price after excluding the outliers is to be computed.

The members were informed that under the new policy, the units in each group would receive the concession after adjustment on account of escalation/de-escalation in the variable cost related to changes in the price of feedstock, fuel, purchased power and water. The Department will work out the modalities for this purpose for Stage-I and Stage-II on the basis of group energy data and efficient consumption patterns of the units keeping in view the data of the eighth pricing period.

After commencement of Stage-I and also beyond Stage-II, there shall neither be any reimbursement of the investment made by a unit for improvement in operations nor any mopping up of gains of the units as a result of operational efficiency.

The parameters outlined in the new scheme shall be the inputs for computation of concession. The outliers having a retention price higher that 20 per cent or more from the group average in their respective group would be granted an adjustment phase of one year, i.e., Stage-I. During Stage-I, such outliers will get a rate of concession based upon the group weighted average (after excluding outliers) and a structural adjustment which will be 50 per cent of the difference between their respective retention price and the group average.

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