New urea policy calls for international price-parity formula

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In a bid to deal with shortfall in urea production in the country, the government on Friday announced a new pricing policy for attracting investment in the sector.

The new urea investment policy was approved by the cabinet committee on economic affairs (CCEA) chaired by Prime Minister Manmohan Singh. Under the fresh norms, 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% in a price band of $250-425 a tonne, while the same for expansion of capacity would be 90%.

The policy based on the recommendations of the Abhijit Sen Committee which aims at attracting investments in urea sector for addition of production capacities through revamp and expansion of existing units, revival of eight closed units of Fertiliser Corporation of India Ltd and Hindustan Fertiliser Corporation Ltd, and the Greenfield projects.

Urea from the revived units of HFCL and FCIL would be recognised at 95 % of IPP in the same price band, science and technology minister Kapil Sibal said. Under the new policy, only non-APM gas will be considered for the new investments in urea sector.

Further, gas transportation charges will be paid to units undertaking expansion and revival on the basis of actuals (upto 5.2 Gcal per MT of urea) as decided by the Regulator (Gas) subject to a maximum ceiling of USD 25 per MT of urea.

The cap will be subject to indexing as applied in case of inland transportation cost of urea.

The Cabinet also announced it would further open up trade under Safta by reducing to 480, the sensitive items list that will remain outside the concessional trade in the region.