In order to increase domestic urea production, the Fertilizer Ministry has notified New Urea Investment Policy for setting up and expansion of urea plants.

According to the policy, interested private companies are required to give a bank guarantee of Rs 300 crore for every project, while PSUs firms have been exempted from it.

The companies will get a subsidy on production only if the urea production starts in the next 5 years. The subsidy will continue till 8 years after the commencement of production.

In February, the government approved the amendments in the policy after as many as 13 players including IFFCO, RCF and Tata Chemicals proposed setting up of urea plants entailing capacity addition of 16 million tonne, whereas the shortfall between demand and production of urea is around 8 million tonne which is met through imports.

Sources said the proposed capacity addition by the applicants was more than the actual requirement as earlier policy was assuring the ‘guaranteed buyback’

Following this, the ministry proposed for dropping the guaranteed buyback clause and replacing it with the Rs 300 crore bank guarantees so that only interested players approach for setting up of new urea projects.

According to the sources, as per policy the flexible lower limit and ceiling limit of urea cost has been fixed after factoring the gas price from $ 6.5 mmbtu to $ 14 mmbtu.

These provisions were made in the policy before the government decided to raise the gas prices from April 1, 2014.

The decisions on various issues during the implementation of this policy will be taken by a Committee of Secretaries including from Expenditure, Petroleum, Planning Commission and Agriculture. Fertilizers Secretary will be Chairman of the committee.