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India needs to invest Rs 40,000 crore in the fertiliser sector to increase the country’s urea production capacity to 33.7 million tonnes (MT) by the end of the 12th Five Year Plan, an expert group has said.
According to a report of the Working Group set up by the Planning Commission for the 12th Five Year Plan (2012-17), investment in the sector by end of 2010-11 stood at Rs 27,247 crore.
“To increase the capacity of urea by about 12 million tonnes to a total of 33.7 MT by 2016-17, India will need to invest at least Rs 40,000 crore in the sector at current capital costs,” the group, which was chaired by the Fertiliser Secretary, said in its report
The indigenous capacity of the functional units for urea stood at 22.20 MT besides 1.65 MT from OMIFCO, Oman - a joint venture of Oman government and cooperative majors IFFCO and KRIBHCO, it added.
The demand of 33.7 MT of urea by 2016-17 fiscal is based on current consumption patterns.
This could change in the next five years depending on the irrigation/crop pattern and change in percentage growth in agricultural production.
However, the report said there has been almost no investment in the fertiliser sector in the past decade.
“The fertiliser sector attracted huge investments during 70’s and 90’s. However, there has been hardly any investment during the 10th and 11th Five Year Plan,” it pointed out.
Though other sectors had high rate of return on investments due to accelerated growth in the Indian economy, the fertiliser sector has failed to attract more investment due to low returns, the report added.
Recently, a Group of Ministers (GoM) had approved a new investment policy for the urea sector, to make the nation self-sufficient in the key soil nutrient.
With demand-supply gap of urea widening, the government in 2010 decided to frame a new policy. Last year, a Committee of Secretaries (CoS), headed by Planning Commission Member Mr Soumitra Choudhary, was set up for this purpose.
According to the report, government had notified a New Investment Policy for urea sector in September 2008 based on the recommendations of the Committee headed by Planning Commission Member Mr Abhijit Sen.
“The policy resulted in increase in capacity by approx 23 lakh tonnes due to revamp of few existing plants but failed to attract any investments in the expansion, greenfield or brownfield projects in the urea sector due to uncertainty in availability and pricing of gas,” it pointed out.
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