New Delhi: The Cabinet Committee on Economic Affairs is likely to discuss this week an investment policy for the urea sector that promises higher remunerative prices with a view to increase production by 10-15% in the short-term.
“The Fertilizer Ministry’s proposal was to come up at the CCEA meeting last week but couldn’t be taken up. It is slated to come up for approval this week,” a Fertilizer Ministry official said.
Under the proposal, it has recommended international price -parity for domestic urea manufacturers. However, a maximum cap price of $425 per tonne will be taken into consideration for payment of subsidy by the government. This is better than present consideration of $ 350 per tonne, he said.
“There has been no investment in the fertilizer sector for the last 15-20 years. Production capacity did not increase and output fell because of closure of some plants. Clearly there was a need for a policy to attract high investment in the fertilizer sector,” the official said.
The policy would provide incentives to efficient producers and would be applicable only for additional production and not existing one, he explained. Urea production capacity is targeted to almost double to 40 million tonnes by 2012.
The current installed urea capacity is 21.04 million tonnes while demand has surged to 27-28 million tonnes. The gap is met through imports from overseas markets where prices have gone up substantially leading to a three-fold rise in subsidy.
The Ministry has proposed 85-95% parity with global prices to the domestic producers of urea while simultaneously putting a price band of $250-425 per tonne, he said.