In a major policy initiative, the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister Narendra Modi, on Tuesday gave a go ahead to supply gas at uniform delivered price to all fertiliser plants on the gas grid for production of urea through a pooling mechanism.
It is expected that the cost of production of urea at pooled price would be less than the price of imported urea, which will encourage the existing urea units to produce beyond their reassessed capacity. The increase in urea manufacturing capacity will also contribute to the ‘Make in India’ initiative, an official statement said.
This reform measure is also expected to augment indigenous manufacturing capacities. It is expected to help in reviving the Gorakhpur, Barauni and Sindri urea plants. These three urea plants will serve as the anchor load customers for Jagdishpur Haldia pipeline. As a result, work on this pipeline which was approved in 2007 is expected to start in this financial year.
In a related development, the Union Cabinet also approved the revival process of Gorakhpur and Barauni fertiliser units. The Department of Fertilizer (DOF) has estimated that the CCEA’s decision will lead to additional production of around 37.13 lakh million tonnes of urea in existing fertilisers units over the next four years (i.e., 2015-16 to 2018-19). This will reduce import dependence to this extent and result in saving of Rs 1,550 crore of subsidy.
At present, there are 30 urea producing units in the country, out of which 27 units are gas based and three units - Mangalore Chemicals & Fertilisers limited (MCFl), Madras Fertilisers limited (MFl) and Southern Petrochemicals Industries limited (SPIC) are Naphtha based. Out of the total consumption of about 30 million metric tonnes per annum (MMTPA) of urea, about 23 MMTPA of urea is currently produced in the country.