Despite rising consumption of urea, the most commonly used fertiliser in the country, indigenous production has been near-stagnant for the past 12 years. For, no fresh investments have come in urea manufacturing since 1999.
The stagnancy is attributed to stringent regulations amid unattractive returns on investment under the present policies. Urea accounts for 75 per cent of nitrogenous fertiliser consumption, with annual demand of 28 million tonnes (mt), of which 22 mt is indigenously produced. The rest is imported.
There has been no progress in the deregulation of urea since an empowered group of ministers approved it in August this year. The government confirmed to Parliament on December 1 that no new investments had come even after the New Investment Policy for Urea was notified in September 2008.
Output has risen by about two mt since 2008, through revamp of existing plants. Notably, even the Gas Utilisation Policy notified in 2008, that gave priority to fertiliser manufacturing plants, was unable to attract fresh investments.
Fertiliser Association of India Director-General Satish Chander said, “The industry would invest further once there is commitment from the government about the availability of gas at reasonable prices and also the right pricing policy to decide subsidy.”
At least six proposed projects, which could add as much as eight mt of capacity, are waiting for implementation, subject to announcement of the investment policy, he added. U S Awasthi, managing director of the Indian Farmers Fertiliser Cooperative Ltd, said that the industry does not even get the allocated gas.
Asking for the subsidies to be transferred directly to farmers, he said, “The present policy does not bring confidence to the investors. Hence, the industry is demanding that urea be brought under the Nutrient Based Subsidy scheme.”
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On the other hand, China, a urea importer until 2006, has turned into a net exporter of urea since then.
Tarun Surana of Sunidhi Securities attributed this to aggressive enhancement in capacities by China, 70 per cent of which are coal-based.
India has no coal-based urea production, output here being mainly based on natural gas, naptha and fuel oil.