The government today cleared a new policy to encourage investment in the urea sector aiming to boost the stagnating production of the crop nutrient and reduce the country's import dependence.
The Cabinet Committee on Economic Affairs (CCEA) approved the new investment policy based on the recommendation of the Abhijit Sen Committee, Science and Technology Minister Kapil Sibal said after the meeting.
The domestic manufacturers will get 85-95 per cent of the international price subject to a price band of $250-425 per tonne, as per the new norms.
The current installed capacity of urea is 21 million tonnes while the demand has surged to 27-28 million tonnes.
The gap is met through imports. The production capacity is targeted to reach 40 million tonnes by 2012 with the new policy.
While welcoming the policy, the Fertiliser Association of India said production may improve by three million tonnes in the next two years subject to availability of gas.
"The entire thing depends on gas availability and price. If it is available to fertiliser manufacturers at $5 per mmbtu the urea production will go up," FAI Director General Satish Chander said.
The cost of nitrogen is important as the government gives huge subsidies to producers to fulfill its social commitments of providing urea at a cheaper rate.
While calculating subsidy, the domestic manufacturers are presently placed at a disadvantage. This is because the cost of indigenous production works out be lower than the landed cost of imports.
Instead of getting incentives for production at a low cost the domestic manufactures stand to lose.
Fertiliser industry has been demanding price-parity to attract more investment into the sector as producers feel they would have earned more by selling it in international market.
