The country’s top fertiliser companies have put their expansion plans on hold following the government?s plan to remove the ?guaranteed buyback scheme? under the New Urea Investment Policy (NIP). Companies like Tata Chemicals, Indian Farmers Fertiliser Cooperative (Iffco) and Kribhco, among others, have halted their expansion.
?Under these conditions, we will not be setting up any urea plants. The price of the raw material is too high and, in addition, the government is not increasing the price of urea, nor de-controlling it. The absence of the buyback guarantee will make the NIP meaningless,? US Awasthi, IFFCO chairman, told FE.
As per the buyback scheme, the government would lift the entire urea stocks of fertiliser firms in case no other buyer is found by them. This scheme was to be made available to units for a period of eight years from the date of start of production under the new policy. The assurance has now been removed.
?The government seems to have made up its mind and identified five players for setting up urea plants by changing the New Investment Policy. We have been planning to set up plants and expand our business but now we have put those plans on hold,? a senior official of Tata Chemicals told FE requesting anonymity.
An official from Kribhco also confirmed that the cooperative’s urea capacity addition plans have been put in abeyance.
The government aims to cut down the list of applicants interested in putting up new urea units. From a lot of nearly 20 applicants who wanted to set up new plants, the government has shortlisted five ‘serious’ players, including Rashtriya Chemicals and Fertilisers, Chambhal Fertilisers, Indo-Gulf and Nagarjuna Fertilisers, and the FCI’s Talcher unit.
These five names will now be submitted to the Cabinet for ratification, sources in fertiliser ministry said. The government had set a cap of 31 million standard cubic metres a day (mmscmd) on domestic gas supply to fertiliser companies. This has cast a shadow on the future of upcoming urea projects. It has decided that during the next three years, 2013-14, 2014-15 and 2015-16, all additional domestic gas would be allotted to the power sector to help improve generation.
An EGoM would review the gas production and allocation scenario after 2015-16.
India is import-dependent in case of both urea and non-urea complexes. In 2012-13, India imported around 8 million tonne of urea. The present domestic urea production is about 22 million tonne while consumption is pegged at 29 million tonne.
The limited availability of domestic gas has also led urea players to depend on expensive imported gas for production.