New Urea Investment Policy
- It aims to entice fresh investment of about Rs.35,000 crore to boost domestic production by 8 million tonnes.
- 12-20 % post-tax return will be given by the government on fresh capital
infused by the manufacturers for establishing new plants as well as for
expansion and refurbishment of the existing ones.
- To ensure this return, the government would cover the entire cost of
natural gas, which is the main feedstock of urea, and accounts for 80 %
of the cost.
- Urea sector is controlled by the government and it has fixed the maximum retail price (MRP) at Rs.5,360 a tonne.
- The difference between the MRP and the cost of production is given as subsidy to manufacturers.
- The government has set a floor and ceiling price of urea, based on the
price of natural gas plus 12-20 per cent equity returns in order to
determine the cost of production of new plants to be established after
the policy comes into effect.
- India produces 22 million tonnes of urea, against the requirement of 32 million tonnes.
