The Cabinet Committee on Economic Affairs (CCEA) is likely to consider tomorrow a proposal to raise the fixed cost of urea by upto Rs 350 per tonne, a move that would lead to increase in subsidy by about Rs 900 crore.
Recently, the Group of Ministers (GoM) had approved the Fertiliser Ministry's proposal to raise the urea fixed cost under the New Pricing Scheme (NPS) III.
The CCEA would also consider a proposal to modify the New Investment policy for urea, in order to boost the domestic production of the soil nutrient.
As per the proposal, the fixed cost of urea would be raised by up to Rs 350 per tonnes subject to maximum of Rs 2,300 per tonnes.
In the case of plants which are more than 30 years older, they will be given additional Rs 150 per tonne.
For a urea plant, fixed cost mainly includes salary & wages, contract labour, repair & maintenance and selling expenses.
In another proposal, the CCEA is likely to consider amendment in the New Investment Policy (NIP) for urea for dropping the 'guaranteed buyback' provision to prevent excess capacity addition.
The NIP policy was notified in January last year to incentives firms to invest in the urea sector and reduce dependence on imports.
The Fertiliser Ministry has moved a proposal to amend the policy to remove the 'guaranteed buyback' clause, that assured buyback of urea for eight years from start of production.
Due to this clause, the government had received about 13 investment proposals entailing capacity addition of 16 million tonne.
The proposed capacity addition by the applicants was more than double the actual requirement, forcing the Fertiliser Ministry to have a second thought on this clause.
Urea production in the country is stagnant at 22 million tonnes and the gap of 8 million tonnes is met through imports. So far, about 4 million tonnes of urea has been imported.
