A Group of Ministers on Friday recommended a new fertiliser investment policy which envisages creation of new urea production capacity of up to 6 million tonnes. The policy will have to be cleared by the Cabinet Committee on Economic Affairs (CCEA) before it can be implemented.
Without disclosing details, the Petroleum Minister, Mr S. Jaipal Reddy, emerging from the meeting, said: “It is more or less cleared, with some caveats”.The new urea investment policy is expected to be announced in the Union Budget 2012-13 on March 16.
The proposed policy is likely to provide gas linkage for up to 75 per cent of new capacity to be created from domestic gas resources, while the rest has to be met through imports.
The Government may provide a subsidy for the price differential between domestic and imported gas. Besides, it also talks about linking domestic cost of production to the percentage cost of imported urea and is likely to pave way for the urea deregulation, sources said.
No new capacity has been added in the past 13 years due to lack of an appropriate policy framework resulting in widening demand-supply gap, currently pegged at 7 million tonnes.
The domestic production is around 22 million tonnes, while consumption is pegged at 29 million tonnes. The shortfall is mainly met through imports.
According to industry estimates, the shortfall is expected to touch 10 million tonnes by the end of the 12{+t}{+h} Plan in 2016-17.
In a bid to plug the widening demand-supply gap, the Government had set up a Committee of Secretaries (CoS) in 2010 headed by Planning Commission member, Mr Saumitra Chaudhary.
On Friday, the Group of Ministers under the leadership of the Finance Minister, Mr Pranab Mukherjee approved the draft policy prepared by the CoS, which has suggested incentives for setting up of greenfield (new plants) and brownfield (expansion of existing plants) facilities.
The Government had previously notified a policy in September 2008 for new investments in urea and long-term offtake through joint ventures abroad.
This helped the industry revamp its existing capacities by removing bottlenecks and increase output by 2 million tonnes per annum.
However, it did not bring in any new investments either through greenfield or brownfield units.