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India’s Urea production is set to get a major boost following the NDA government’s efforts to revive the closed units on one hand, and to encourage setting up of new capacities on the other.
Reflecting the government’s intentions, the Union Budget 2014-15 proposed to launch a new urea policy by overhauling the existing subsidy regime. Prime Minister, Narendra Modi, has already approved the constitution of the Expenditure Management Commission, which will be empowered to frame a new urea policy.
The chemicals and fertilisers ministry is taking steps to ensure increased supply of gas to urea manufacturing plants and to facilitate the revival of five closed plants.
No new urea capacity has been added in India over the past 13 years due to lack of an appropriate policy framework. The country’s urea production has stagnated at 22 million tonne since 2007-08, while the current demand is about 30 million tonne, forcing the country to meet the shortfall of eight million tonne through imports.
The Indian fertiliser sector is dominated by public sector units. At present, there are seven public sector undertakings (PSUs) in the fertiliser sector, namely — Rashtriya Chemicals & fertilisers (RCF), National Fertilisers (NFL), Madras fertilisers (MFL), Fertilisers and Chemicals Travancore (FACT), Brahmaputra Valley Fertilisers Corporation (BVFCL), Fertilisers Corporation of India (FCIL) and Hindustan Fertilisers Corporation (HFCL). These PSUs have a total of 23 manufacturing plants, out of which ten fertiliser plants are closed, while seven others are suffering losses and only six plants are making profits.
In order to revive urea production in the country, the erstwhile government had proposed to restart these closed fertiliser plants. In 2011, the Cabinet Committee on Economic Affairs (CCEA) approved the Draft Rehabilitation Scheme (DRS) for revival of all the units of FCIL and HFCL. As per the scheme, the revival of FCIL’s Talcher urea plant is being undertaken in a joint venture with RCF, Gas Authority of India (GAIL) and Coal India (CIL). Similarly, the revival of FCIL’s Ramagundam unit is to be done in partnership with Engineers India (EIL) and National Fertilisers (NFL) and that of Sindri unit by Steel Authority of India Limited (SAIL)..
However, as the long drawn strategy of reviving and restarting fertiliser units has been moving at a slow pace, the fertilisers ministry is now contemplating adopting greenfield units approach to solve the urea deficiency of the country.
BVFCL is planning to set up a urea-ammonia plant in Assam. The proposed urea plant will have a capacity of 8.64 lakh tonne per annum and will be set up in partnership with Oil India (OIL) and the Assam government.
Khubal Fertiliser Company, a JV between ONGC and Chambal Fertilisers & Chemicals, is setting up a urea plant at Kumarghat, Unakoti, in North Tripura, which is likely to be operational by 2017. Madras Fertilizer is also looking to set up a urea plant with an investment of Rs 4,500 crore, in Chennai.
To bring alive the dormant capacities, the fertilsers ministry has requested the petroleum ministry to explore the possibility of setting up a gas pipeline from Phulpur to Haldia as it can lead to the revival of five closed plants. The proposed Rs 10,000 crore pipeline can help in the revival of Sindri, Baroni, Haldia, Gorakhpur and Durgapur fertiliser plants.
The Talcher and Ramagundam projects are also likely to go on-stream in the near future, but they will need at least 36-48 months to become operational and require a combined investment of Rs 9,000-9,500 crore. Once revived, these two units will raise the domestic urea production capacity by three million tonne.
The Union Government is also considering bringing out a comprehensive National Fertiliser Policy. At present, there are different sets of policies for urea and complex fertilisers. The price of urea is still controlled and fixed by the government, while companies are free to decide prices on complex fertilisers as the subsidy component is fixed. As stated in the Economic Survey 2013-14, Urea's highly subsidised price leads to its unbalanced use over complex fertilisers, resulting in wastage of more than Rs 8,500 crore of both, the government and farmers
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