CCEA nod for hiking fixed cost of Urea

The Cabinet Committee on Economic Affairs (CCEA) approved Rs 350/tonne increase in the fixed cost for urea plants in reference to the Group of Minister’s recommendations. For urea plants, the fixed cost includes salary and wage expenses, contract labour, repair and maintenance, and selling costs. This move would lead to increase in subsidy by about Rs. 900 crore. Though, it would not have any impact on urea prices.
Under the New Pricing Scheme (NPS) III, the fixed cost of urea produced by plants which are 30 years old or more by Rs. 150/tonne and for all other plants by Rs 350/tonne. The minimum fixed cost would be Rs 2,300/tonne.
The CCEA also approved modification in the New Investment Policy for the soil nutrient to boost its domestic production.
The New Investment Policy:

  • Dropped the ‘guaranteed buyback’ provision that assured buyback of urea for 8 years from start of production.
  • Inserted a provision of bank guarantee of Rs. 300 crore from companies keen to set urea plants under this policy.
  • Government will provide subsidy on sale of urea produced from the new plants. 

Note: In India, Urea production is stagnant at 22 million tonnes and the gap of 8 million tonnes is met through imports. To date, about 4 million tonnes of urea has been imported.