Commodities

With 3 new projects ready to take off, urea imports set to decline

SHISHIR SINHA New Delhi | Updated on June 10, 2014 Published on June 10, 2014

Boost to production

Government to notify changes in new investment policy shortly

Urea imports are set to dip with the Government expected to notify changes in the new investment policy shortly.

“Apart from increasing availability of domestic urea, the revised policy has the potential to bring investments of ₹15,000-20,000 crore in the next three years,” Fertiliser Secretary Shaktikanta Das told BusinessLine. The previous Government had already approved changes in the new investment policy, but these could not be notified due to the elections.

The changes in the policy include removing guaranteed buyback and provision of bank guarantee by the companies. In order to attract only serious players, each project developer will have to provide bank guarantee of ₹300 crore which will be gradually returned once stipulated milestones are achieved. A committee would be set up under the chairmanship of the Fertiliser Secretary, with Secretaries of other key Ministries as members, to sort out difficulties, if any, arising in setting up the new plant.

Currently, the total demand for urea in the country is 30 million tonnes while domestic production is approximately 22 million tonnes. The difference in demand and domestic availability is met through supply of 2 million tonnes from IFFCO’s joint venture in Oman and the rest through imports from other countries.

New projects

With the revised policy, the Ministry sees implementation of at least three projects immediately. These include revival of the defunct unit of Fertiliser Corporation of India at Talchar in Odisha, setting up anew project at Thal in Maharashtra and a third one from the private sector. One more private sector project is expected to take wings. However, no details are available on these private sector projects.

Each of the first three will have a manufacturing capacity of 1.3 million tonnes and involve an investment of approximately ₹5,000 crore each. Once these projects are completed, domestic availability is expected to rise by around 4 million tonnes, thus reducing dependence on imports.

Meanwhile, the Fertiliser Ministry is hoping that more domestic natural gas will be provided to meet the demands of the new projects. “It is essential to have additional domestic natural gas for producing urea to keep subsidy budget under check,” Das added. If the proposed units do not get domestic natural gas, then they will have to rely on imported and costly LNG (liquefied natural gas). This will raise the subsidy bill.

Urea is the only controlled fertiliser where difference between the cost of production as assessed by the Fertilizer Industry Coordination Committee (known as the retention price) and the statutorily fixed sale price is paid as subsidy under the Retention Price-cum Subsidy Scheme (RPS). Currently, the fixed sale price is ₹5,360 a tonne.

Published on June 10, 2014

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