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Cabinet increases urea fixed cost by up to Rs 350 per tonne

It also approved changes to the policy that aims at encouraging new investment in the urea sector by removing 'guaranteed buyback' clause and including a provision of bank guarantee of Rs 300 crore from companies. For urea plants, the fixed cost mainly includes salary and wages, contract labour, repair and maintenance and selling expenses.

‘CCEA has approved raising fixed cost of urea by up to Rs 350 per tonne. It has also approved amendments to the New Investment Policy for urea sector,’ sources said.

In line with the recommendation of the the Group of Ministers (GoM), the fixed cost of urea has been increased by up to Rs 350 per tonnes. The minimum fixed cost, including the hike, should be Rs 2,300 per tonnes under the New Pricing Scheme (NPS) III.

In the case of plants which are more than 30 years older, they will be given additional Rs 150 per tonne. To boost investment in the urea sector, CCEA also cleared amendments to the New Investment Policy for urea sector by dropping the 'guaranteed buyback' provision, that assured buyback of urea for eight years from start of production. Other changes in the policy include insertion of 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.

The NIP policy was notified in January last year to incentivise firms to invest in the urea sector and reduce dependence on imports.

Sources said the 'guaranteed buyback' provision had to be amended in the policy as government had received 13 investment proposals entailing capacity addition of 16 million tonne mainly due to this clause.

The proposed capacity addition by the applicants was more than double the actual requirement, forcing the Fertiliser Ministry to have a second thought on this clause. Urea production in the country is stagnant at 22 million tonnes and the gap of 8 million tonnes is met through imports.
So far, about 4 million tonnes of urea have been imported.

CIL board okays forming JV to revive Talcher urea plant

New Delhi:
State-run Coal India Ltd's (CIL) board on Friday gave an in-principle approval to form joint venture for reviving fertiliser firm FCIL's closed urea plant at Talcher in Odisha at a cost of Rs 8,000 crore.

‘The CIL board in its meeting has agreed in principle to form joint venture for the revival of Talcher urea plant,’ sources said.

The consortium of Rashtriya Chemicals Fertilisers (RCF), GAIL, CIL and FCIL will invest Rs 8,000 crore for the revival of urea plant at Talcher with a production capacity of 1.2 million tonnes per annum.

Fertiliser Corporation of India Ltd (FCIL) had signed a memorandum of understanding (MoU) with Rashtriya Chemicals and Fertilisers (RCF), Gail and CIL in September last year for revival of this plant, which was closed in 2002.

The MoU was signed to form two separate joint ventures to revive this plant and also build a power plant and coal washery facility at the site. The project is expected to be commissioned by 2017.

In September 2013, Fertiliser Minister Srikant Jena had said that the first joint venture would be for upstream coal gasification with GAIL having major stake. The second JV would be for urea-cum-ammonia nitrate complex with RCF and CIL having major stakes.

According to the senior officials, RCF and CIL will have around 42 per cent stake each in JV for downstream. GAIL will have 5 per cent stake and rest would be with FCIL. In the upstream JV, around 80 per cent stake will be held by GAIL and about 10 per cent stake will be with the technology provider of coal gasification. The rest would be with FCIL.

The government had approved revival of 5 closed units of FCIL at Sindri, Talcher, Ramagundam, Gorakhpur and Korba. The Centre had also waived loan and interest amounting to Rs 10,644 crore to FCIL.
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