The government's move to revive five defunct urea plants of the Fertiliser Corporation of India Limited (FCIL) seems both ill-advised and mistimed. These units, located at Sindri, Talcher, Ramagundam, Gorakhpur and Korba, were shut down over 10 years ago owing to prolonged irremediable sickness. The Cabinet Committee on Economic Affairs (CCEA) has waived their outstanding loans, including interest, worth Rs 10,644 crore in order to get these factories out of the purview of the Board for Industrial and Financial Reconstruction. Surprisingly, these units are proposed to be handed over to other public sector undertakings - such as Coal India Limited, Engineers India Limited, Steel Authority of India Limited, National Fertilisers Limited and Rashtriya Chemicals and Fertilisers Limited - some of which are not suited to take up this task. Some may, in fact, jeopardise their own fragile economic viability in the process. The old FCIL units, notably, are based on antiquated technology. Feed stocks such as naphtha and fuel oil used by these plants are deemed unsuitable for urea manufacture and are being replaced with natural gas. These plants will, therefore, need to be wholly scrapped and substituted with new ones based on gas as feed stock, deploying the latest processing technology. That would require heavy investment.
What is even more worrisome is that the revival of these units is being viewed as a precursor to a similar move to reopen the three discarded urea plants of Hindustan Fertiliser Corporation Limited located at Durgapur, Barauni and Haldia. In terms of performance, these units were worse than even the FCIL plants - Haldia being, by far, the worst of all. Besides, the revival initiative has come at a time when the urea sector is stressed due to grave policy deficiencies, which are turning away most potential investors. No new urea plant has come up in more than a decade. While phosphatic and potassic fertilisers have been decontrolled and brought under the well-conceived nutrient-based subsidy regime, there has hardly been any significant reform in the urea sector.
Moreover, there is uncertainty over the availability of gas - the preferred feed stock for urea manufacture - to sustain the rejuvenated plants. Present supplies are insufficient to meet the needs even of existing fertiliser factories, forcing many of them to either keep part of their installed capacity idle or import gas at high costs. The supply crunch has been exacerbated by six fuel oil- and naphtha-based factories recently modifying their plants to run on gas. Though the Hazira-Bijaipur-Jagdishpur (HBJ) gas pipeline is proposed to be extended to a couple of the FCIL units slated for restoration, its capacity to meet their needs seems doubtful unless the priority status of the fertiliser sector in gas allocation vis-à-vis the other claimants is restored. Instead of throwing good money after bad, the government should sell the extinct plants' infrastructure. If necessary, it should encourage fresh private investment in the area or allow prospective urea producers to look for opportunities abroad, notably in gas-rich countries, to set up factories there and arrange to bring the output back to India.
