The government has chalked out a multi-pronged strategy including nutrient-based subsidysystem, revival of closed units and tax sops to prop up fresh investment in the fertiliser sector which has otherwise been unattractive for new investors for quite some time.
?The initiative is aimed at overcoming deficiency of secondary and micro nutrients in our soil and facilitate the provision of these nutrients to farmers at affordable prices and bring down subsidy level substantially incentivising increased production in the existing units as well in the country? sources in the Department of Fertilizers (DoF) told FE.
For new units, DoF has also proposed import duty waiver on project imports and an income-tax holiday that would last the first 10 years of commercial production. Similarly, an import-parity pricing formula in place of cost based one will be introduced for the gas based units.
The proposal has been forwarded to the Empowered Group of Ministers set up to review the status of the fertilizer industry.
?The measured designed by the department would make industry efficient and competitive during 11th Five Year Plan? the secretary fertilizers, JS Sarma said when contacted.
For this, the sector need 95 mmscmd gas by 2011-12 to increase the production of fertilizers from the existing 21 million tones to 40 million tones.
The petroleum ministry has agreed to provide 41 mmscmd gas by 2009 which is expected to save Rs 6000 crore in subsidy, Sarma said.
The new policy would ensure that the efficient units get a return of atleast 12% on investment and make sector lucrative and develop infrastructure to ensure healthy competition and efficient input consumption as well as well as conservation, he said.
