S. N. Verma / New Delhi
Taking a major step towards making the agriculture sector self-reliant, the Cabinet Committee on Economic Affairs today approved the National Urea Investment Policy-2026 on the proposal of the Department of Fertilisers.
The policy is aimed at attracting fresh investment to set up a new gas-based urea production unit in India. Earlier, the investment policy framed in 2012 ended in October 2019. Under the 2012 investment policy, six new urea units were set up in the country. Four of these were set up by joint ventures of public sector undertakings and two by private organisations.
At present, there are 33 urea production units operational in India with a total production capacity of 269.42 lakh metric tonnes. Despite this, there is a gap between the country’s total urea demand and the domestic production capacity, which is currently met through imports. With the Department of Fertilisers already receiving several proposals for new plants, this investment policy will create the necessary framework to increase indigenous production and reduce dependence on imports.
In order to make the investment environment more attractive and sustainable, the new policy has made several significant improvements compared to the 2012 framework. For better transparency, the policy clearly differentiates the fixed costs and variable costs of plants. The assured returns have a secure scope of return on equity, with a minimum limit of 12 per cent and a maximum of 16 per cent.
To hedge against foreign exchange risk to protect the investment from currency fluctuations, the fixed cost will be converted into Indian rupees based on the prevailing exchange rates after a period of four years.
These strategic reforms are estimated to save more than ₹250 crore from each new plant set up under this policy compared to the old 2012 policy. From now on, all new urea plants in the country will be established under the rules of this policy, which will bring India very close to complete self-sufficiency in the fertiliser sector.