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Urea self-sufficiency: Govt view termed `untenable'

Our Bureau

NEW DELHI, Aug. 28

THE Parliamentary Standing Committee on Chemicals and Fertilisers has not concurred with the Government contention that 100 per cent self-sufficiency in urea production might not be desirable looking at the costs entailed in setting up nitrogenous fertil iser plants.

In its seventh report, tabled in Parliament recently by the committee's Chairman, Mr. Mulayam Singh Yadav, the committee recalled the response of the Government which had stated that its policy was aimed at achieving maximum possible degree of self-suffi ciency in production of nitrogenous fertilisers and meet only the residual requirement from imports. The role of imports had been to bridge the gap between the demand and indigenous availability.

The Government had said that the high cost of production of urea from plants based on naphtha/fuel oil was adding considerably to the subsidy burden which went up from Rs. 6,235 crores in 1995-96 to Rs. 8,750 crores last year. Subsidisation of high-cost urea plants had consequential impact on the fiscal deficit, the Government told the House panel and as such, there was need to contain subsidy as well as the outgo of foreign exchange.

This could be achieved by striking a balance between availability from indigenous production with that of imports, especially when price of imported urea was cheaper compared to the cost of production from naphtha/fuel oil-based plants. ``Hundred per cen t self-sufficiency in urea may not be desirable looking to the costs involved,'' the Government said.

However, the House panel said it did not subscribe to the views of the Government on this score and in its opinion, this ``sort of mind-set is hampering the expansion proposals of public sector urea industry.'' It said the country's need of urea was incr easing three to four per cent a year whereas the indigenous production was not increasing correspondingly. Above all, it said, the precious foreign exchange should be preserved and used only for strategic core sectors such as defence. As such, the commit tee urged the Government to accord priority to increasing domestic production so as to achieve complete self-sufficiency.

The committee also recalled that out of the approved Ninth Plan (1997-2002) outlay of about Rs. 11,000 crores, the amount spent by the Department of Fertilisers during the first three years viz., 1997-2000, was only of the order of Rs. 2,450 crores, whic h amounted to only 20 per cent of the approved Plan outlay. Reportedly, it said, the shortfall was due to delay in clearance of four mega fertiliser projects _ IFFCO (Nellore Rs. 1,736 crores), Kribhco (Gorakhpur Rs. 1,536 crores), RCF's Thal project (Rs . 1,332 crores) and Kribhco's Hazira project (Rs. 1,318 crores), totaling about Rs. 5,900 crores, besides the Indo-Oman project.The Government had apprised the panel of the Cabinet Committee on Economic Affairs' decision to accord `in principle' approval to the four pending projects for additional urea capacities subject to investment appraisal by the Public Investment Board (PIB) in April 1999. The PIB too, in July 1999, underlined the need to stagger implementation of these projects due to limited dem and-supply gap forecast.

The Department of Fertilisers had also informed that to reduce the incidence of subsidy and in the light of PIB's observation, a proposal had been formulated for taking final action in this regard.

The committee felt that even after the PIB appraised the project in July 1999, there was ``no tangible progress'' in final clearance and more than a year had elapsed. It asked the Government to accord final approval or after recording reasons reject the proposals and said that there should be a timeframe for taking decisions on such crucial matters to avoid cost overruns.