The government’s proposal to remove guaranteed purchase of more of the urea manufactured by new plant, as per the new Urea Policy is unsustainable, according to the industry.
Government controls urea sector and has fixed MRP at `5,360 per tonne. Difference between MRP and production cost is reimbursed as subsidy to fertiliser companies.
The Ministry of Fertilizers moved a proposal to CCEA replacing the guaranteed buyback clause from the policy with a bidding process where government will buy crop nutrient from producers offering the lowest price.
Urea production in the country is stagnant at 22 mt and the gap of 8 mt is met through imports.
The policy was formulated to substitute imports by raising domestic output of urea and had guaranteed buyback of urea for eight years from start of production.
“You cannot have investment policy based on pricing policy. Investment policy should be based on investment,” said U S Awasthi, MD, Indian Farmers Fertilizer Cooperative (IFFCO), India’s largest fertiliser firm.
IIFCO was also one of the companies, which had applied under the present policy, for the brownfield expansion at is Kalol plant in Gujarat. The guaranteed buyback clause had led to flood of applications from companies for expansion of plant.
Industry players also mooted decontrolling urea and providing fertilizer subsidy directly to farmers in order to solve fertiliser industry problems.
However, the proposal to amend the policy was supposed to be taken up in the CCEA meeting on November 13, but was dropped at the last moment.
The Ministry wants to put in place transparent and objective criteria for giving approval to the proposals received so that only as much capacity is added as is required to meet the demand-supply gap.