The department of fertilisers (DoF) has submitted a fresh proposal to the Centre for the revival of nearly six closed units of Fertiliser Corporation of India (FCI) and Hindustan Fertiliser Corporation (HFC).
These units will be revived jointly by Rashtriya Chemical & Fertilisers (RCF), National Fertilisers Ltd (NFL) and Krishak Bharati Cooperative Limited (Kribhco).
Informed sources told FE that RCF, NFL and Kribhco have reiterated their demand for a hefty support from the Centre to carry out revival. ?Its again in the finance ministry?s court in particular to take a decision,? sources said.
The DoF?s argument in this favour is crucial as the finance ministry and the Planning Commission have expressed reservations over its feasibility. Nearly Rs 4,500 crore will be required for the revival project with a capacity of 1.155 million tonnes with a minimum equity investment of Rs 1,500 crore per unit.
The total budgetary support sought is Rs 1,200 crore per unit, leading to a total outgo of Rs 7,200 crore spread over four years for the revival of six units. The DoF has projected that at the current prevailing IPP of $700 per mt, the annual savings from a revived unit of 1.155-mt capacity will be about Rs 1,455 crore.
The DoF, which has stuck to its guns and argued against handing over of these units to the private sector players, submitted that these units were in the public sector when the retention pricing policy did not provide suitable returns but the situation has changed due to the Centre?s new investment policy which promises reasonable returns on investments.
Sources said the urea produced from revival of the closed units will receive a price equivalent to 95% of import parity price (IPP) with a floor of $250 per mt and a ceiling of $425 per mt of urea. In addition, the unit will receive gas transportation charges on the basis of actuals (up to 5.2 Gcal per mt of urea) subject to a ceiling of $25 per mt of urea. Under the above proposed dispensation, the indigenous urea will be substantially cheaper than the imported urea, the price of which is today beyond $700 per mt.The DOF submitted that even if the import price falls in future, the savings will continue to be there except when the IPP falls below the floor of $250 per mt, which is very unlikely.
The department has estimated that the proposed support will be recovered by the government within two years from the estimated savings in subsidy which has mouted to over Rs 1 lakh crore.