New pricing policy to boost investment in urea plants

Mumbai: The government on Friday announced a new pricing policy aimed at encouraging investment in urea production to help increase domestic availability of crop nutrients and reduce the country's dependence on imports.

Under the new urea investment policy, the international price-parity formula for the domestic urea manufacturers would be adopted for calculation of subsidy and cost of production.

Import price parity (IPP) for the revamp of existing units would be recognised at 85 per cent  in a price band of $250-425 a tonne, while the same for expansion of capacity would be 90 per cent. The urea from the revised units of HFCL and FCIL will be recognised at 95 per cent of IPP.

The new investment policy, based on the recommendations of the Sen Committee, aims at attracting investments in urea sector for addition of production capacities through revamp and expansion of existing units, including revival of eight closed units of Fertiliser Corporation of India Ltd (FCIL) and Hindustan Fertiliser Corporation Ltd (HFCL), as also greenfield projects.

The policy provides for an import parity price (IPP) benchmark with floor and ceiling price of $250 per tonne and $425 per tonne respectively, for pricing of urea from new investments in this sector.

The production from revamped projects is proposed to be provided with 85 per cent of IPP subject to the same floor and ceiling price. Similarly, the production from expansion of these units will receive 90 per cent of IPP subject to the floor and ceiling prices. Further, revival of closed units in public sector will get urea price equivalent to 95 per cent of IPP, with the same floor and ceiling prices. The pricing of greenfield projects will be decided based on a bidding process which will be for a discount over IPP, after firming up of the locations (states) of the proposed new plants. The floor and ceiling price will be decided at the time of bidding.