But companies which have drawn up a blue-print to expand fertiliser capacities in the western region, and these include Rashtriya Chemicals & Fertilisers (RCF) and Kribhco, have given reasons for their unwillingness to set up green field units in the place of a cheaper alternative to expand existing facilities. According to sources in the ministry, companies which have applied for public investment board (PIB) clearances for expanding their existing facilities in thewestern region, were asked whether these expansions could take place in the eastern zone instead.

The government's logic to the same is that a shift to the east will bring down the subsidy on the freight element involved during transporation of the fertiliser from the west to the east. For moving seven lakh tonnes of urea from the west to the east, a company would have to incur a cost of Rs 17 crore per annum. This amount being fully subsidised by the government further balloons the subsidy bill. Further, ministry sources feel, that this would also avoid a burden on the railways for providing with extra rakes for transportation.

Without contesting the idea of promoting expansions in the eastern region, companies feel that it is wise to expand existing facilities (in the west) instead of investing a huge sum into setting up green field projects. A greenfield plant would mean incurring an addition Rs 400 crore with the companies having to take an interest burden of Rs 60 crore.

Meanwhile, PIB clearancesof some western zone expansions is pending.The demand-supply scenario for urea in the four regions of the country is skewed with capacities having cropped up to a great extent in the western region while a huge gap in demand-supply stares in the face of the eastern region.

As against a demand of 55.03 lakh tonnes of urea in the western region, the supply is to the tune of 83.46 lakh tonnes, according to industry estimates. Thus the western zone is surplus in urea to the extent of 28.43 lakh tonnes.As compared to a surplus in the western region, the demand-supply gap in the eastern region is a stupendous 20 lakh tonnes. As against a requirement of 26.42 lakh tonnes in the eastern region, the supply is only 6.17 lakh tonnes, industry analysts pointed out. The southern region also suffers from a slight gap in the demand and supply situation. While the demand for urea in the southern region is 38.43 lakh tonnes, the supply stands at 22.94 lakh tonnes. The nNR is also a urea-deficit zone craving for a bettersupply. The demand in the north is 75.23 lakh tonnes as against the availability of 61.85 lakh tonnes of urea.

Besides a few loss making units like Hindustan Fertiliser, the only other company which plans to set up a mega-size (around 8,800 tpd) plant in the eastern region is Oswal.

The deficit zones are supplied urea from the western region and some from imports. Urea being a decontrolled commodity and the supply being canalised by the centre, companies are given allocations to various regions in the country so as to enable a uniform distribution of the fertiliser depending on the demand for the same.

INSIGHT

By asking the public sector to set up greenfield urea plants in the eastern region rather than expanding the existing capacities, the government has put these companies in a fix. However, the argument of both the sides is logical. Setting up a greenfield project is a costly venture, at the same time transporting it across the country is a burden on government resources.

However,considering the financial aspects involved, setting up a greenfield project is unviable. Further with the government's long-term proposal of reducing the subsidy on urea setting up a low cost project makes more sense. The saving in terms of transportation is marginal and can be easily passed on to the farmers if need be.