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The Union Cabinet on Wednesday approved a new policy on urea to incentivise domestic manufacturers and freed transportation of P (phosphorus) and K (potassium) fertilisers.
It has also linked the incentive given to domestic manufacturers with their annual energy consumption to lower the carbon footprint. The urea policy will be in force for next four financial years starting from 2015-16.
The government says the new urea policy will increase annual production by two million tonnes (mt) and cut the yearly subsidy bill by Rs 4,800 crore, of which direct saving would be Rs 2,618 crore.
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OTHER DECISIONS Ahead of the PM’s visit to China, South Korea and Mongolia, the Cabinet approved signing of 9 agreements with these countries |
CHINA
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While freeing the transportation of potassium and phosphorus it has decided to continue the subsidy rate for diammonium phosphate at Rs 12,350 per tonne and Rs 9,300 per tonne for muriate of potash. The subsidy on transportation of P and K through rail would be given on a lumpsum basis which would help companies economise on transport.
“Movement plan for P and K fertliser has been freed to reduce monopoly of few companies in a particular area so that any company can sell P and K in any part of the country,” Chemicals and Fertiliser Minister Ananth Kumar told reporters.
For urea, too, the Maximum Retail Price for farmers has been left untouched at Rs 268 a 50-kg bag, excluding local taxes, with an additional Rs 14 for neem-coated urea.
India’s annual urea production (there are about 35 manufacturing units) has stagnated at 22 mt and the country has had to import about eight mt to meet domestic demand. According to the new incentive structure for domestic urea units, the Centre would reimburse the fixed cost incurred by the domestic units that produce 100 per cent more than their reassessed capacity along with a part of the variable cost. However, this incentive would have to be less than the import parity price of urea or whichever is less. The assessment for the energy consumed would be based on a combination of the previous new pricing scheme and average energy consumed in last three years.
“It is certainly a positive step forward to bring reform in the urea sector. The industry welcomes this and we have been waiting for this for a long time,” said Rakesh Kapur, chairman of Fertiliser Association of India told Business Standard.
Earlier, the government had approved a gas pooling policy, under which all urea units would get gas at the same price.
The government had modified the pricing scheme for urea in 2014, deciding to reimburse fixed cost to producing units at Rs 350 a tonne. That scheme had ended this month.
The Planning Commission had estimated India needed to invest at least Rs 40,000 crore at current capital cost to raise urea capacity by about 12 mt.
Total investment in the entire fertiliser sector, including urea, was Rs 27,247 crore at the end of 2010-11.
