The Hindu Business Line : CCEA okays new urea pricing policy

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New Delhi Feb. 1 In order to increase the availability of urea, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved the New Pricing Scheme (NPS) phase-III to encourage urea production from the indigenous urea units beyond 100 per cent of their installed capacity by introducing a system of incentives for additional production subject to merit order procurement.

At present, urea producers require prior permission from the Government to produce beyond 100 per cent of their capacities. Under the new system, the companies would not be required to seek permission for additional production.

They would also be permitted to retain part of the additional profit generated from additional output.

Timeframe for conversion

The NPS-III seeks to promote the usage of natural gas, which is the most efficient and comparatively cheaper feedstock, for production of urea. A timeframe of three years has been provided for conversion of all non-gas based urea units to gas-based units.

To expedite conversion, the policy provides for non-mopping up of energy efficiency for a period of five years. In case of non-conversion, the policy disincentivises high cost production from non-gas based units by restricting their subsidy to import parity price of urea, after three years, an official release said.

Projects abroad

The new policy also encourages setting up of joint venture projects abroad where gas is readily available at reasonable prices. It also recognises the large import dependence in the domestic fertiliser sector and seeks to create a specialised agency to coordinate investments abroad in the fertiliser sector.

To facilitate unhindered movement of fertilisers to far-flung areas, the reimbursement of freight will be based on actual leads for rail and road movement.

The rail freight will be reimbursed as per the actual expenditure and the road freight will be escalated with respect to the composite road transport index every year.

It has also been decided that the Department of Fertilisers will operate a buffer stock through the state institutional agencies and fertiliser companies in major consuming States up to a limit of 5 per cent of their seasonal requirement, to meet unexpected spurt in demands or local shortages.