New Urea Policy to Maximise Indigenous Urea Production

The policy aims on promoting energy efficiency in urea production, and rationalizing subsidy burden on the government
New Urea Policy to Maximise Indigenous Urea Production

The Department of Fertilizers has taken various initiatives during the last one year. These initiatives aim at working in the direction of promoting the indigenous production of fertilizers, and making them available to the farmers in time.

The New Urea Policy-2015 (NUP-2015) has been notified by Department of Fertilizers on 25th May, 2015 with the objectives of maximizing indigenous urea production; promoting energy efficiency in urea production; and rationalizing subsidy burden on the government. It is expected that the domestic urea sector would become globally competitive in terms of energy efficiency over a period of three years. On the basis of actual energy consumption and preset norms, the units have been divided into three groups and revised energy consumption norms have been fixed for next three financial years and target energy norm have been fixed for 2018-19. It will drive urea units to select better technology and different measure to reduce energy consumption. The higher energy efficiency due to aforesaid measur e will reduce subsidy bill. It is expected that there would be reduction in the subsidy burden of the government in two ways – reduction in specific energy consumption norms and import substitution on account of higher domestic production. It is expected that the new urea policy will lead to additional production of 1.7 LMT annually in the next three years.

Neem Coating of Urea: It has been made mandatory for all the indigenous producers of urea to produce 100 percent of their total production of subsidized urea as Neem Coated urea. Since NCU cannot be used for industrial purposes, illegal diversion of subsidized urea to non-agricultural use would not be possible. By curbing this illegal diversion of Urea for non-agricultural purposes, the government aims to prevent subsidy leakages.

New Investment Policy (NIP) – 2012 : The Government had notified the New Investment Policy 2012 to facilitate fresh investment in urea sector and to make India self sufficient in the urea sector. Subsidy will be given only upon domestic sale as at present for a period of 8 years from the date of start of production. Thereafter, the units will be governed by the urea policy prevalent at that time.

As per the said policy, to ensure seriousness/credibility of the project proponents under NIP-2012 and for timely execution of the projects, all the project proponents are required to furnish Bank Guarantee (BG) of Rs. 300 crores for each project. The BG is linked to milestones in the project cycle. Out of Rs. 300 crores, Rs. 100 crores of BG will be released after finalization of LSTK/ EPCA contractors and release of advance to the contractor’s account; Rs. 100 crores of BG will be released on completion of equipments ordering and supply to the site or midpoint of the project cycle, whichever is earlier; and the balance of Rs. 100 crores of BG on completion of the project. PSUs are, however, exempted from furnishing the BG.

Setting up 8.6 LMTPA Urea plant in Namrup (Assam): The government has approved Setting up a New brown field Ammonia-Urea complex of minimum 8.646 LMTPA at Namrup with the existing premises of BVFCL on PP basis ( by inviting bids from public/private sector for 52 percent equity in the project). Transaction Advisor (TA) for selecting the 52 percent equity partner of the proposed JV appointed on October 13, 2015.

Taking forward revival of Talcher, Ramagundam, Sindri, Gorakhpur and Barauni units: The government had approved revival of all the Units of FCIL and HFCL on nomination route and bidding route.

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