Cabinet Committee on Economic Affairs approved uniform gas price for urea plants

The Cabinet Committee on Economic Affairs (CCEA) on 31 March 2015 approved to supply gas at uniform delivered price to all fertilizer plants on the gas grid for production of urea through a pooling mechanism.

As per the estimation of the Department of Fertilizer (DOF), the decision will lead to additional production of around 37.13 lakh million tones (MT) of urea in existing fertilizers units over the next four years, that is, from 2015-16 to 2018-19.

Further, the decision will reduce import dependence and will result in saving of 1550 crore rupees of subsidy.

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.

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.

At present, there are 30 urea producing units in the country, out of which 27 units are gas based and three units, viz., Mangalore Chemicals and Fertilizers Limited (MCFL), Madras Fertilizers Limited (MFL) and Southern Petrochemicals Industries Limited (SPIC) are Naphtha based.

Out of the total consumption of about 30 Million Metric Tonne Per Annum (MMTPA) of urea, about 23 MMTPA of Urea is currently produced in the country. In addition to domestic production of Urea, around 2 MMTPA is imported from Oman under the Urea Off-Take Agreement (UOTA) which will continue till 2020.

The shortfall of about 5 MMTPA Urea is being met through imports. Urea demand during 2017-18 is projected to be about 34 MMTPA and by 2024-25, it is expected to be 38 MMTPA. Hence, in absence of new capacity addition in the country, urea imports would have increased.