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ANNUAL REPORT2011-2012
GOVERNMENT OF INDIA MINISTRY OFCHEMICALS & FERTILIZERS
DEPARTMENT OF FERTILIZERS
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CONTENTS
S.No. Subjects Page No.
1. Introduction
2. Organizational Set up and Functions
3. Development & Growth of Fertilizer Industry
4. Availability of Major Fertilizers during 2011-12
5. Plan Performance
6. Measures of Support for Fertilizers
7. Public Sector Undertakings
8. Fertilizer Education Projects
9. Information Technology (IT)
10. Vigilance Activities
11. Rights to Information Act, 2005
12. Progressive Use of Official Language (Hindi)
13. Welfare of SCs, STs, OBCs and Physically Handicapped persons
14. Woman Empowerment
15. Citizen Charter/Grievance Redressal Mechanism
16. Annexure I to XIV
1-3
4-5
6-14
15-16
17-18
19-37
38-60
61-63
64-67
68-68
69-69
70-72
73-74
75-77
78-78
79-104
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Presenting the dividend cheque for the year 2010-11 to the Hon'ble Minister (Chemicals & Fertilizers)
Shri M.K. Alagiri by Dr. S.K. Das, CMD, FAGMIL. Shri Sutanu Behuria, former Secretary (Fertilizers),Shri S C Gupta, Joint Secretary, DoF, Shri Deepak Kumar, Director (Movement), DoF are alsopresent along with others.
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3
CHAPTER -1
1.1 INTRODUCTION
1.1.1. Agriculture which accounts for one fifth of GDP,
provides sustenance to two-thirds of our
population. Besides, it provides crucial
backward and forward linkages to the rest of the
economy. Successive five-year plan have laid
stress on self-sufficiency and self-reliance in
food grains production and concerted efforts in
this direction have resulted in substantialincrease in agriculture production and
productivity. This is clear from the fact that from
a very modest level of 52 million MT in 1951-52,
food grain production rose to about 235.88
million MT in 2010-11. In India's success
in agriculture sector, not only in terms of
meeting total requirement of food grains but
also generating exportable surpluses the
significant role played by chemical fertilizers is
well recognized and established.1.1.2 Keeping in view the vital role played by
chemical fertilizers in the success of India's
green revolution and consequent self-reliance
in food-grain production, the Government of
India has been consistently pursuing policies
conducive to increased availability and
consumption of fertilizers in the country. As a
result, the annual consumption of fertilizers in
nutrient terms (N, P & K ), has increased from
0.7 lakh MT in 1951-52 to 281.22 lakh MT
2010-11, while per hectare consumption of
fertilizers, which was less than 1 Kg in 1951-52
has risen to the level of 144.14 Kg (estimated )
in 2010-11.
1.1.3 As of now, the country has achieved near self-
sufficiency in production capacity of urea with
the result that India could substantially manage
its requirement of nitrogenous fertilizers
through the indigenous industry. Similarly,
adequate indigenous capacity has been
developed in respect of phosphatic fertilizers to
meet domestic requirements. However the raw
materials and intermediates for the same are
largely imported. As for potash (K) since there
are no viable sources/reserves in the country,
its entire requirement is met through imports.
1.2 GROWTH OF FERTILIZER INDUSTRY
1.2.1. The industry made a very humble beginning in1906, when the first manufacturing unit of
Single Super Phosphate (SSP) was set up in
Ranipet near Chennai with an annual capacity
of 6000 MT. The Fertilizer & Chemicals
Travancore of India Ltd. (FACT) at Cochin in
Kerala and the Fertilizers Corporation of India
(FCI) in Sindri in Bihar ( now Jharkhand) were
the first large sized -fertilizer plants set up in the
forties and fifties with a view to establish an
industrial base to achieve self-sufficiency in
food-grains. Subsequently, green revolution in
the late sixties gave an impetus to the growth of
fertilizer industry in India and the seventies and
eighties then witnessed a significant addition to
the fertilizer production capacity.
1.2.2 The installed capacity as on 31.03.2010 has
reached a level of 120.61 lakh MT of nitrogen
and 56.59 lakh MT of phosphatic nutrient,
making India the 3rd largest fertilizer producer in
the world. The rapid build-up of fertilizer
production capacity in the country has been
achieved as a result of a favourable policy
environment facilitating large investments in the
public, co-operative and private sectors.
1.2.3 Presently, there are 30 large size fertilizer
plants in the country manufacturing urea (as on
date 29 are functioning) 21 units produce DAP
and complex fertilizers, 5 units produce low
analysis straight nitrogenous fertilizers and the
9 manufacture ammonium sulphate as by-
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product. Besides, there are about 84 medium
and small-scale units in operation producing
SSP. The sector-wise installed capacity is given
in the table below: -
SECTOR-WISE, NUTRIENT-WISE INSTALLED
CAPACITY OF FERTILIZER MANUFACTURING
UNITS AS ON 31.03.2010
Sr
No
Sector Capacity
(lakh MT)
PercentageShare
N P N P
1
2
3
Public Sector
Cooperative
SectorPrivate Sector
34.98
31.69
53.94
4. 33
17.13
35.13
29.0
26.27
44.73
7.65
30.27
62.08
Total: 120.61 56.59 100.00 100.00
1.3 SELF-SUFFICIENCY IN FERTILIZER SECTOR
1.3.1 Out of three main nutrients namely nitrogen,
phosphate and potash, ( N,P&K) required for
various crops, indigenous raw materials are
available mainly for nitrogenous fertilizers. The
Government's policy has hence aimed at
achieving the maximum possible degree of self-sufficiency in the production of nitrogenous
fertilizers based on utilization of indigenous
feedstock. Prior to 1980, nitrogenous fertilizer
plants were mainly based on naphtha as
feedstock. A number of fuel oil/LSHS based
ammonia-urea plants were also set up during
1978 to 1982. In 1980, two coal-based plants
were set up for the first time in the country at
Talcher, (Orissa) and Ramagundam, (Andhra
Pradesh). These coal based plants have,
however, been closed by Government w.e.f.
1.4.2002 due to technical and financial non-
viability. However, with natural gas becoming
available from offshore Bombay High and South
Basin, a number of gas based ammonia-urea
plants have been set up since 1985. As the
usage of gas increased and its available supply
dwindled, a number of expansion projects came
up in the last few years with duel feed facility
using both naphtha and gas. Feasibility of
making available Liquefied Natural Gas (LNG)
to meet the demand of existing fertilizer plant
and/or for their expansion projects along with
the possibility for utilising newly discovered gas
reserves, is also being explored by various
fertilizer companies in India.
1.3.2. In case of phosphates, the paucity of domestic
raw material has been a constraint in the
attainment of self-sufficiency in the country.
Indigenous rock phosphate supplies meet only
5-10% of the total requirement of P2O5.A policy
has therefore been adopted which involves mix
of three options, viz, domestic production based
on indigenous/imported rock phosphate,
imported sulphur and ammonia; domestic
production based on indigenous / importedintermediates, viz. ammonia and phosphoric
acid; and third, import of finished fertilizers.
During 2010-11 roughly 70% of the requirement
of phosphatic fertilizers was met through the
first two options.
1.3.3. In the absence of commercially exploitable
potash sources in the country, the entire
demand of potassic fertilizers for direct
application as well as for production of complex
fertilizers is met through imports.
1.3.4. Given the volatility in international market for
fertilizer in general and urea market in
particular, marginal provision through imports
could be used to the country's strategic
advantage. This is also desirable as the
international market, especially in case of urea,
is very sensitive to demand supply scenario.
Under the new pricing regime for urea units
applicable from 01.04.2003, for securing
additional indigenous supply of urea,
economically efficient units are being permittedto produce beyond their re-assessed capacity
to substitute/ minimize imports.
1.4 FERTILIZER SUBSIDY
1.4.1. The subsidy on fertilizers is passed on to the
farmers in the form of subsidized MRPs. The
selling prices as notified by Government for the
subsidized fertilizers are much lower than the
normative delivered cost of these fertilizers at
farm gate level. The difference between the
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normative delivered cost at farm gate level and
the notified selling prices is paid as subsidy to
manufacturers/importers on sale of fertilizers to
the farmers at the subsidized prices.
1.4.2 The increase in rate of subsidy on fertilizers
combined with increase in consumption of
fertilizes has led to a substantial increase in
requirement of subsidy. In spite of increase in
cost of fertilizes, the Government has
completely kept the farmers insulated from this
increase in cost and have increased the subsidy
allocations to meet the consumption needs of
the farmers at subsidized level of prices. The
subsidy on fertilizers has been increasedsharply over the last few years. The details of
fertilizer subsidy over the last few years are as
below:-
sulphur, ammonia, phosphoric acid, electricity,
etc., as also the cost of transportation, went up
significantly during the eighties. The gas-based
fertilizer units commissioned during this period
also involved higher capital investment per
tonne of installed capacity, necessitating
constant upward revision in the retention prices.
The selling prices of fertilizers to the farmers,
however, remained almost at the same level
between July, 1981 and July 1991. The
Government effected an increase of 30% in the
issue prices of fertilizers in August, 1991 after a
gap of a decade. The selling price of urea,
which was reduced by 10% in August 1992, was
revised upwards by 20% in June 1994 followedby another increase by 10% with effect from
21.2.97. The prices of urea were again revised
in February 2002 by 5% and by Rs. 240 PMT of
DETAILS OF EXPENDITURE ON SUBSIDY/CONCESSION
Period Amount of concession disbursed onDecontrolled Fertilizers
(Indigenous + imported)
Amount of Subsidy
disbursed on Urea
Total for allfertilizers
Indigenous
P&K
Imported
1P&K
Total
(P&K)
Indigenous
Urea
Imported
Urea
Total
(Urea)
2007-08 10333.80 6600.00 16933.80 16450.37 9934.99 26385.36 43319.16
2008-09 32957.10 32597.69 65554.79 20968.74 12971.18 33939.92 99494.71
2009-10 16000.00 23452.06 39452.06 17580.25 6999.98 24580.23 64032.29
2010-11 20650.00 20850.00 41500.00 15080.73 9255.95 24336.68 65836.68
2011-12(RE)
19832.00 14954.87 34786.87 19308.00 17475.00 36783.00 71569.87
2012-13
(BE)
16000.01 12576.11 28576.12 19000.01 18016.00 37016.01 65592.13
1.4.3 The steady increase in fertilizer subsidies over urea w.e.f. 28.2.2003. The price increase madethe years has largely been the result of effective from 28.2.2003 was, however, laterincreasing production / consumption and withdrawn w.e.f. 12.3.2003. The MRP of urea i.increases in the costs of inputs of indigenous e. Rs. 4830 per tonne exclusive of local leviesfertilizers and prices of imported fertilizers from continued upto 31-03-2010. With effect from 1-time to time. The cost of various inputs / utilities, 04-2010, MRP of urea increased by 10% i. e.such as coal, gas, naphtha, rock phosphate, from Rs. 4830 per MT to Rs. 5310 per MT.
*****
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CHAPTER -2
4 DEPARTMENT OF FERTILIZERS MINISTRY OF CHEMICALS & FERTILIFERS
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*****
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Year of
Comm.
Unit Feedstock andSector
InstalledCapacity
(lakh/MT)
1967 GSFC-Baroda Gas-Private 3.706
1969 SFC-Kota Naphtha-Private 3.790
1970 DIL-Kanpur Naphtha-Private 7.220
1971 MFL-Madras Naphtha-Public 4.868 @
1973 ZIL -Goa Naphtha-Private 3.993
1975 SPIC-Tuticorin Naphtha-Private 6.200
1976 MCFL-Mangalore Naphtha-Private 3.800
1978 NFL-Nangal FO/LSHS-Public 4.785
1978 IFFCO-Kalol Gas-Coop. 5.445 @
1979 NFL-Bhatinda FO/LSHS-Public 5.115
1979 NFL-Panipat FO/LSHS-Public 5.115
1981 IFFCO-Phulpur Gas--Coop. 5.511
1982
RCF-Trombay
-V
Gas-Public
3.301982 GNFC-Bharuch FO/LSHS-Private 6.360
1985 RCF-Thal Gas-Public 17.068
1986 KRIBHCO-Hazira Gas-Coop. 17.292
1987 BVFCL-Namrup-III(Formerly HFC)
Gas-Public 3.150
1988 NFL-Vijaipur Gas-Public 8.646
1988 IFFCO-Aonla Gas-Coop. 8.646
1988 Indogulf-Jagdishpur Gas-Private 8.646
1992 NFCL-Kakinada Gas-Private 5.9701993 CFCL-Gadepan Gas-Private 8.646
1994 TCL-Babrala Gas-Private 8.646
1995 KRIBHCO SHYAM -
Shahja- hanpur(Formerly OCFL)
Gas-Private 8.646
1996 IFFCO-Aonlaexpansion
Gas-Cooperative 8.646
1997 NFL-Vijaipurexpansion
Gas-Public 8.646
1997 IFFCO-Phulpurexpansion
Gas--Cooperative 8.646
1998 NFCL-Kakinadaexpansion
Naphtha-Private 5.970
1999 CFCL-Gadepanexpansion
Naphtha/Gas-Private
8.646
2005 BVFCL:Namrup-II Gas-Public 2.400 @
3.1 D E V E L O P M E N T A N D G R O W T H O FFERTILIZER INDUSTRY
3.1.1 CAPACITY BUILD-UP
At present, there are 30 large size fertilizer
plants in the country manufacturing urea (as on
date 29 are functioning) 21 units produce DAP
and complex fertilizers, 5 units produce low
analysis straight nitrogenous fertilizers and the
9 manufacture ammonium sulphate as by-product. Besides, there are about 84 medium
and small-scale units in operation producing
SSP. The total installed capacity of fertilizer
production which was 119.60 lakh MT of
nitrogen and 53.60 lakh MT of phosphate as on
31.03.2004 has marginally increased to120.61
lakh MT of nitrogen and 56.59 lakh MT of
phosphate as on 01.04.2010.
3.2 PRODUCTION CAPACITY AND CAPACITY
UTILISATION3.2.1. The production of fertilizers during 2010-11
was 121.56 lakh MT of nitrogen and 42.22 lakh
MT of phosphate. The production target for
2011-12 was 127.56 Lakh MT of nitrogen and
49.24 Lakh MT of Phosphate, representing a
growth rate of 4.9% in nitrogen and 13.9% in
Phosphate as compared to production in 2010-
11. Production target for nitrogenous fertilizer is
more than the installed capacity. The production
target for phospahtic fertilizer is less than
installed capacity due to constraints inavailability of raw materials/ intermediates
which are substantially imported. However,
taken together, the production of 'N' and 'P'
during the year is very nearer to the
corresponding period of last year
3.2.2. The production performance of both
nitrogenous and phosphatic fertilizers during
the year 2010-11 was satisfactory. Production of
nitrogenous fertilizers was less than target by
2.97 Lakh MT, as there was no production by
SPIC. The production of phosphatic fertilizers
was more than target by 6.22 Lakh MT.
3.2.3. The installed capacity of urea units in thecountry is as follows:-
UREA UNITS SET UP BETWEEN 1967-2005 WITH
REASSESSED CAPACITY
Note: @ After revamp
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3.2.4 The following 9 urea plants of the companies
are presently closed/under shutdown due to
various reasons, inter-alia, on account of
t e c h n o l o g i c a l o b s o l e s c e n c e , f e e d s t o c k
limitation, non-viability of unit/company andheavy financial losses.
Sl.No.
Name of theCompany/Unit
Date ofclosures
AnnualInstalledCapacity(In Lakh MT)
1. FCI: Gorakhpur 10.6.1990 2.852. FCI: Ramagundam 1.4.1999 4.953. FCI: Talcher 1.4.1999 4.954. FCI: Sindri 16.3.2002 3.305. HFC: Durgapur 1.7.1997 3.306. HFC: Barauni 1.1.1999 3.307.
RCF: Trombay-I
1.5.1995
0.98
8. NLC: Neyveli 31.3.2002 1.539. FACT: Cochin-I 15.5.2001 3.30
Total 28.46
Note: Production by DIL-Kanpur (7.22 LMT) was suspended due
to financial constraints.
E x p a n s i on a n d c a p a c i t y a d d i t i o n /
e f f i c i e n c y e n h a n c e m e n t t h r o u g h
retrofitting / revamping of existing
fertilizer plants.
Setting up joint venture projects in
countries having abundant and cheaper
raw material resources.
Working out the possibility of using
alternative sources like liquefied natural
gas, coal gasification, etc., to overcome
t h e c o n s t r a i n t s i n t h e d o m e s t i c
a v a i l a b i l i t y o f c h e a p a n d c l e a n
feedstock, particularly for the production
of urea.
Looking at possibilities of revival of
some of the closed units by setting up
brownfield units subject to availability of
gas.
3.2.5. The domestic fertilizer industry has by and
large attained the levels of capacity utilisation
comparable with others in the world. The
capacity utilisation during 2010-11 was 100.9%
for nitrogen and 75% for phosphate. Theestimated capacity utilisation during 2011-12 is
104.4% of nitrogen and 78.7% of phosphate.
Within this gross capacity utilization, the
capacity utilisation in terms of the urea plants
was 109.2% in 2010-11 and 107.4% in 2011-12.
As for phosphate fertilizers, apart from the
constraints mentioned earlier, the actual
production capacity utilisation has also been
influenced by the demand trends.
3.2.6. The capacity utilisation of the fertilizer industry,particularly in respect of urea, is expected to
i m p r o v e f u r t h e r t h r o u g h r e v a m p i n g /
modernisation of the existing plants..
3.2.7 The unit-wise details of installed capacity,
production and capacity utilisation during 2010-
11 and 2011-12 are given in Annexure-IV.
3.3 STRATEGY FOR GROWTH
3.3.1 The following strategy has been adopted to
increase fertilizer production:
3.4 FEED STOCK POLICY
3.4.1 At present, natural gas based plants account for
more than 66% of urea capacity, naphtha is
used for less than 30% urea production and the
balance capacity is based on fuel oil and LSHS
as feedstock. The two coal based plants at
Ramagundam and Talcher were closed down
due to technological obsolescence and non-
viability.
3.4.2 Natural gas has been the preferred feedstock
for the manufacture of urea over other
feedstocks viz. naphtha and FO/LSHS, firstly,
because it is clean and efficient source of
energy and secondly, it is considerably cheaper
a n d m o r e c o s t e ff e c t i v e i n t e r m s o f
manufacturing cost of urea which also has a
direct impact on the quantum of subsidy on
urea.
3.4.3 Accordingly, the pricing policy, announced in
January 2004, provides that new urea projects,
expansion of existing urea units and capacity
i n c r e a s e t h r o u g h d e - b o t t l e n e c k i n g /
r e v a m p / m o d e r n i z a t i o n w i l l b e a l s o
allowed/recognized if the production comes
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from using natural gas/LNG as feedstock.
For the same reasons, a policy for conversion
of the existing naphtha/FO/LSHS based urea
units to natural gas/LNG as feedstock hasalso been formulated in January 2004, which
encourages early conversion to natural
gas/LNG. Pursuant to formulation of policy
for conversion of non-gas urea units to gas,
three naphtha based plants namely, Chambal
Fertilizers & Chemicals Limited (CFCL),
Gadepan-II and IFFCO-Phulpur-I & II have
already converted to NG/LNG. Shriram
Fertilizers & Chemicals Limited (SFC-Kota)
has also started using gas w.e.f. 22nd
September 2007.
3.5 REQUIREMENT AND AVAILABILITY OF
GAS TO FERTILIZER SECTOR
3.5.1 Allocation of Natural Gas for FY 2011-12
Ministry of Petroleum & Natural Gas on 30th
September 2011 has allocated 3.021
mmscmd of gas as against the demand of
3.732 mmscmd of gas during the current year
2011-12, from the additional gas available
from ONGC's nominated blocks. However,no allocation has been made to IFFCO-
Phulpur (0.3 mmscmd) and IGFL-Jagdishpur
(0.338 mmscmd). Department of Fertilizers
has therefore requested Ministry of Petroleum
& Natural Gas (MoPNG) to include the above
demand. In addition DOF has also requested
MoPNG for meeting the requirement of 1.28
mmscmd of gas by the ZIL, Goa who will
complete the pipeline connectivity by the first
week of Feb 2012 and the requirement of 0.10
mmscmd of NFCL-Kakinada because of lean
gas supply to the unit.
3.6. ALLOCATION OF NATURAL GAS FOR FY
2012-13 ONWARDS
3.6.1 DOF has already communicated year-wise
requirement of Natural Gas to Ministry of
Petroleum & Natural Gas (MoPNG). DOF has
requested MoP&NG that a minimum firm
allocation of 24.2 mmscmd gas is required to
be allocated by MOPNG for setting up of
seven expansion units, two Greenfield units
and revival of at least two closed urea units of
FCIL/HFCL on gas, so that the country can
become self sufficient in Urea production innext three to four years. Further, a firm
allocation of 3.75 mmscmd of gas by MOPNG
should be made for FO/LSHS based urea
units converting to gas and 8.52 mmscmd of
gas for conversion of naphtha based units.
3.6.2 Allocation and pricing of CBMMOPNG has
been requested to take immediate action for
allocation of the required CBM to the urea unit
being setup by MATIX at Burdwan. MOPNG
has also been requested for deciding the price
of CBM as soon as possible, since the unit isunder construction and any delay in allocation
of CBM and discovery of its price may impact
the viability and production from the said urea
unit.
3.6.3 Gas pipeline connectivity - Connectivity to all
FO/LSHS and Naphtha based urea units
converting to gas, revival of closed urea units
of FCIL and HFCL and proposed Greenfield
units need to be provided on priority basis.
The required pipeline connectivity throughvarious pipelines for the aforesaid urea units
is indicated below:
The units of NFL at Bhatinda, Nangal (Punjab)
and Panipat (Haryana) are to be connected by
Dadri-Bawana-Nangal pipeline.
Indian Farmers Fertilizers Cooperative Ltd
(IFFCO), Phulpur and Indo-Gulf Fertilizers
Limited (IGFL), Jagdishpur were allocated only
half of their additional requirement of gas from
KG-D6 due to capacity constraint in thepipeline. MoPNG indicated that the remaining
gas will be supplied after the enhancement of
pipeline capacity by 2011-12.
Connectivity to DIL-Kanpur can be through
adjacent pipeline network.
Construction of Jagdishpur-Haldia pipeline
may be expedited for providing gas to units in
eastern sector (Halida, Baruni, Gorakhpur,
Durgapur, Burdwar, Kanpur).
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S.No. Name of Unit Status of pipelineconnectivity
1 HFCL/ FCIL
a
Durgapur
Proposed to beconnected to GAILsproposed Haldia-Jagdishpur pipelineauthorized by GoI butthe laying of thepipeline is being firmedup based onconfirmation regardingschedule for revival ofthe plant.
b Barauni Proposed to beconnected to GAILs
proposed Haldia-Jadishpur pipelineauthorized by GoI butthe laying of thepipeline is being firmedup based onconfirmation regardingschedule for revival ofthe plant.
c Ramagundam No plans to connectthis unit to any GAILsupcoming pipeline butmay be connected to
Mallavaram-Bhilwarapipeline for which bidshave been submitted toPNGRB
d Gorakhpur Proposed to beconnected to GAILsproposed Haldia-Jadishpur pipelineauthorized by GoI butthe laying of thepipeline is being firmedup based onconfirmation regarding
schedule for revival ofthe plant.
e Haldia Proposed to beconnected to GAILsproposed Haldia-Jadishpur pipelineauthorized by GoI butthe laying of thepipeline is being firmedup based onconfirmation regardingschedule for revival ofthe plant.
New pipeline to connect the closed units of
HFCL-Durgapur, HFCL-Barauni, HFCL-Haldia,
FCIL-Sindri & FCIL-Gorakhpur should be
targeted for completion by 2013-14.
Early gas connectivity to naphtha units viz MFL-
Chennai, ZIL-Goa, MCFL-New Mangalore and
SPIC-Tuticorin will lead to a substantial subsidy
savings.
Revival
3.6.4 Status of Pipeline connectivity for FertilizerPlants.
Expansion
S.No. Name of Unit Status of pipelineconnectivity
1
KRIBHCO-Hazira(Gujarat)
The plant has beenconnected throughnewly laid DUPLconnectivity whereincapacity exists.
2 RCF-Thal(Maharashtra)
Presently capacity doesnot exist in DULPpipeline but the same isplanned to augmented.
3 ChambalGadepan(Kota)
Rajasthan
Presently limitedcapacity exists in Kota-
Vijaipur segment,however, the same isplanned to beaugmented
4 TCL-Babrala Presently capacity ofHVJ/DVPL has beenaugmented but in thedownstream segmentthere is capacityconstraint in the
Auraiya-Dadri segment
which is planned to beaugmented.
5 IGFL-Jagdishpur(UP)
Presently capacity ofHVJ/DVPL has beenaugmented but in thein the downstreamsegment there iscapacity constraint inthe Auraiya-Dadrisegment which isplanned to beaugmented.
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Take Agreement (AOTA). OMIFCO is
examining possibility of expansion and increase
in production of Urea and Ammonia.
B. ICS SENEGAL
The Government of India (GoI), Indian Farmers
Fertilizer Cooperative Ltd. (IFFCO) and
S o u t h e r n P e t r o c h e m i c a l s I n d u s t r i e s
Corporation Ltd. (SPIC) formed a joint venture
company in Senegal named Industries
Chimiques du Senegal (ICS). Later on SPIC
withdrew from the project. In recent past, the
company suffered financial losses. However,
ICS Senegal has been restructured in 2008 with
Government of India, IFFCO and other Indianc o n s o r t i u m p a r t n e r s h a v i n g 8 5 % a n d
Government of Senegal having 15% share.
The restructuring plan after having been
approved by the Regional High Court of Dakar
(Senegal) on 27.3.2008 has come into effect
and ICS Senegal, as restructured is in
operation.
ICS Senegal has a capacity to produce 6.60
lakh tones of phosphoric acid per annum and
also finished phosphate fertilizer such as DAPand Complex fertilizers. A major portion of the
phosphoric acid, about 5.5 LMT produced in the
ICS plant is off-taken by IFFCO as per a long
term buy back arrangement and utilized for
production of phosphate fertilizers in India. The
finished fertilizers DAP and complex fertilizers,
produced by ICS Senegal is for domestic
consumption in Senegal.
C. IJC JORDAN
SPIC, Jordan Phosphates Mines Company Ltd.
(JPMC) and Arab Investment Company (AIC)
set up a joint venture project, Indo-Jordan
Chemicals Company Limited (IJC) in Jordan in
May 1997 with a capacity of 2.24 lakh tonnes of
phosphoric acid production per annum. 52.17%
of the equity of the joint venture is held by SPIC,
34.86% by JPMC and 12.97% by AIC.
Phosphoric Acid produced by IJC is off-taken
by SPIC and other fertilizer units in India.
D. IMACID MOROCCO
IMACID, a joint venture between Office
Cherifien des Phosphates (OCP), Morocco,
and Chambal Fertilizers & Chemicals Ltd.(CFCL), India to produce 3.60 lakh MT of
phosphoric acid per annum was commissioned
in Morocco in October 1999. After subsequent
joining of Tata Chemicals Limited (TCL),
capacity of the plant has been increased to 4.30
LMT per annum. Initially, equity of US$ 65
million in the venture was held by OCP & CFCL
equally. Subsequently, in May 2005, both OCP
& CFCL have sold one-third of their equity stake
in IMACID to TATA Chemicals Limited.
3.8.3 OVERSEAS JOINT VENTURES UNDER
IMPLEMENTATION / CONSIDERATION
A. JIFCO JORDAN
Indian farmers Fertilizers Cooperative Ltd
(IFFCO) and Jordan Phosphate Mining
Company (JPMC) have agreed for setting up of
a joint-venture Phosphoric Acid production
plant, Jordan India Fertilizer Company (JIFCO)
in Jordan with an installed capacity of 1500 MT
of phosphoric acid per day (MTPD) or 4.3 MillionTonne Per Annum . Equity holding in the project
is 52:48 between IFFCO and JPMC,
respectively. The plant is expected to be
commissioned by 2013.
B. TIFERT TUNISIA
Gujarat State Fertilizers & Chemicals Ltd
(GSFC) and Coromandel International Ltd
(CIL), formerly Coromandel Fertilizers
Ltd.(CFL) both Indian entities alongwith Groupe
Chimique Tunisien (GCT) & Compagnie DesPhosphates De Gafsa (CPG), both Tunisian
entities are setting up a joint venture project,
Tunisian Indian Fertilisers S.A. (TIFERT) at
Skhira in Tunisia for production of 3.6 lakh MT of
Phosphoric Acid per annum. The entire
production of phosphoric acid would be for off
take by GSFC and CIL. An MOU to this effect
was signed in October, 2005 between parties.
Estimated cost of the project is approx. US $
165 million + 5% with equity of US $66 million
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and borrowings of US $99 million. The project is
expected to be commissioned by end of the
year 2011-12.
C. COOPERATION IN SYRIA
The India-Syrian Joint Commission in its
meeting held in January 2008 took note of the
mutual interest of both countries in the field of
Phosphatic raw-materials and products. It was
agreed that both countries would work for
cooperation in the fertilizer sector in Syria.
Accordingly, a consortium of Indian entities
including MECON, RITES and PDIL (All central
Government PSUs), having expertise in the
fields of mining, beneficiation, processing,setting-up and running the phosphatic plants
and logistic aspects are undertaking capacity
e n h a n c e m e n t c o n s u l t a n c y s t u d y w i t h
GECOPHAM in Syria. Government of India is
funding the study. As per the MOU signed
between this Department and GECOPHAM in
May 2009, the Indian consortium undertook the
feasibility studies, which have now been
completed and the Pre-Feasibility Report has
been submitted to the Syrian Authorities. A
Government level MOU spelling out broadframe work of cooperation in Phosphate sector
between the Countries has also been signed in
Oct' 2010. The consortium has submitted the
Feasibility Report to GECOPHAM. The
authorities concerned in Syria have to consider
the report. For the reason of ongoing socio-
political situation in Syria, matter is stand still at
present, however, the DOF is keeping a close
watch in the matter.
D. COOPERATION WITH RUSSIAOn 12.03.2010 an MOU has been signed
between the Government of India and the
Government of Russia, during the visit of Prime
Minister of Russia to India, envisaging inter-alia
encouraging collaboration in the areas of trade,
production, possible establishment of Joint
Ventures, investment and R&D activities,
exchange of information and holding of
consultations on the issues of production and
consumption of mineral fertilizers, exchange
experience encourage contacts between the
specialists, organization of Joint Conferences,
symposia and business events on the issues of
Co-operations in the sector of mineral fertilizers.
In the follow-up a senior level officers visited
Russia in November'2011 to discuss with the
various Russian entities about possibilities of
Joint Ventures for production of Potash in
Russia. Some proposals have been received,
which are being examined in the Department.
E. COOPERATION IN INDONESIA
A team led by the Secretary (F) visited
Indonesia during 30.10.2010 to 02.11.2010 to
hold preliminary discussions with theIndonesian Authority to ascertain the technical
feasibility of putting up of an Ammonia Urea
plant based on Coal Gasification Technology.
During the visit of the President of Indonesia as
Chief Guest on occasion of the Republic Day is
January 2011 following two documents have
been signed:
(i) MOU for setting up an Ammonia Urea Plant in
Indonesia and agreement for off-take of surplus
urea produced in the plant.(ii) Agreement for supply of 3 L MT of Urea and 2.5
LMT of NPK Complex fertilizer in designated
grades.
M/s Rashtriya Chemicals & Fertilizers Ltd.
(RCFL) is pursuing with the Indonesian
Authorities about the proposal for JV Ammonia
Urea Plant in Indonesia. The Indonesian
Authorities have assured for the full cooperation
to RCFL in this regard.
F. COOPERATION IN AUSTRALIA
Indian Farmers Fertilizer Cooperative Ltd
(IFFCO) has entered into a 'Principles of Off-
take Agreement' with Legend International
Holdings of Australia to undertake joint mining
of rock phosphate in Lady Annie mines
(Georgina Basins in Queens land) along with an
assured three million MT annual off-take. A total
of US $800 million investment has been
envisaged for undertaking rock phosphate
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mining in Australia. IFFCO would provide both
technical and financial facilitation to Legend
International Holdings in the development of its
and the Government of Belarus on 27.08.2011.
As per Protocol follow up action are in progress
regarding long term agreement for supply of
phosphate mining and shipment of its product to
potash from Belarus to India at concessional
India. price and the possible equity acquisition in
G. COOPERATION IN GHANAe arus a y n an en es. rm
uantities of Potash for off-take to India over the
Given its gas reserves, Ghana is considered a next 7 years beginning from the year 2012, have
rich source of nitrogenous feedstock. Chairman been communicated to Belarusian company
of Ghana National Petroleum Corporation and the negotiations on prices are going on. As
(GNPC), Ghana during his visit to India, in regards, exploring possible equity acquisition in
September 2009 and discussed with the Belaruskali, this Department is pursuing the
Secretary (F) the possibility of cooperation in matter with the concerned authorities in Belarus
Fertilizer sector was discussed. It was proposed in consultation with MEA and the Indian Mission
to set-up a Ammonia-Urea plant (Gas based) in
in the Country.
Ghana. To give proper shape to the project-
proposal, an MOU has been signed in July 2010
at the Government level between the Countries. The President of Mali was scheduled to visit
As per MOU, to proceed further a technical India during 11th
12th of January, 2012.
team comprising of Officers from RCF & PDIL Keeping in view the availability of Phosphate
visited Ghana. Site selection Report and the resources in the country, DOF proposed to
Pre-feasibility reports were prepared by RCF enter into an MOU with Mali. Accordingly, a
and PDIL, which were provided to Ghanaian copy of the draft MOU was sent to MEA on 2nd
Authorities. In January'2011 a team led by January, 2012 with a request to consider the
Secretary (F) visited Ghana to discuss further same in consultation with the L&T Division of
modalities in the matter. Ghanaian Authorities
have been requested for an early decision on
pricing of Gas.
MEA and also for pursuing the same with theGovernment of Mali. The response from Mali is
awaited.
The Government of Ghana has conveyed that 3.8.4 DISCUSSIONS FOR COOPERATION IN
their Cabinet has formally given its approval for
formation of the Ghana-India Joint Venture Discussion are on with the fertilizer and minin Fertilizer Company (with 1 million tone entities in following resource rich countries forproduction capacity). The Share Structure as
approved by the Cabinet of Ghana is 48% for
RCF (India) and 52% for the Government of
Ghana. RCF has prepared the draft JointVenture Agreement and a copy of the same has
b e e n c o m m u n i c a t e d t o t h e G h a n a i a n
Authorities for their consideration. It is likely to
finalize the JV Agreement by both the sides at
an early date.
H. CO-OPERATION WITH BELARUS
During the visit of a delegation led by Secretary
(East), Ministry of External Affairs a Protocol
was signed between the Government of India
long term cooperation for setting up of projects
for production and off take of fertilizers:
(i) Discussion at Government level is underwayw i t h t h e G o v e r n m e n t o f S e n e g a l f o r
development of Matam phosphate mines.
(ii) Two separate consortia of Indian entities
comprising IPL & IFFCO and MMTC & RCF are
in discussion with M/s Potash One and M/s
Athabasca Inc respectively of Saskatchewan
province for setting up Joint Venture projects in
mining of Potash and off take to India.
Consortium of RCF and MMTC, which is
pursuing with Athabasca, have signed an MOU
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for JV project with Athabasca for evaluation and
assessment in technical, marketing and
financial aspect. They have also signed a
confidentiality agreement for sharing relatedinformation. Consortium of IFFCO and IPL have
requested PotashOne for providing detailed
costing and other economic parameters
involved in the project.
(iii) RCF and IDC/FOSKOR of South Africa are
exploring the possibilities to set up a Phosphoric
Acid and Ammonia-Urea fertilizer project near
Maputo Port, the capital city of Mozambique.
The project proposes to source Rock from the
new mines of Foskor in Phalaborwa, South
Africa. An MOU has been signed between RCF
and IDC/FOSKOR. Department of Fertilizers
has been pursuing with M/s SASOL, for
allocation of gas in Mozambique for setting up a
JV ammonia-urea project.
(iv) Discussions are also going on for exploring
possibilities for an Ammonia-Urea project Qatar
with buy back by India. IFFCO and QUAFCO
(Public sector entity of Qatar) have signed
'Agreement of Intention' on 24.2.2009 for the
same.
(v) M/s Nagarjuna Fertilizers & Chemicals Ltd.
(NFCL) is pursuing with the Government of
Nigeria for setting up of AmmoniaUrea Joint
Venture Fertilizer Project in Nigeria. The
Nigerian Government has assured about
supply of adequate quantity of gas for the
project. The prices of the gas for the project
have also been finalized.
*****
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3
CHAPTER -4
4.1 AVAILABILITY OF MAJOR FERTILIZERSDURING 2011-12
CONTROLLED FERTILIZERUREA
4.1.1 The availability of urea, which is the only
fertilizer under price and partial movement
control of Government, remained satisfactory
throughout the Kharif 2011 season as well as
during the current Rabi 2011-12 (uptoDecember, 2011).
KHARIF 2011
4.1.2 The field opening stock of 4.25 LMT as on
1.4.2011 coupled with indigenous production
of 108.16 LMT and imports of 33.82 LMT
helped in progressively ensuring adequate
availability to the States throughout the
season. The cumulative availability of urea at
the end of the season was nearly 146.23
LMT against the assessed requirement of142.16 LMT. The sales were of 139.21 LMT
urea during Kharif 2011.
anywhere in the country at notified maximumretail price.
4.2 DECONTROLLED FERTILIZERS DAP &
MOP
KHARIF 2011
4.2.1 In case of fertilizers other than the urea, whichare decontrolled, no allocation is made under
Essential Commodities Act (ECA) by theCentral Government. Assessment ofrequirement of Urea, DAP and MOP is beingmade by the Department of Agriculture &Cooperation to enable better monitoring ofavailability at the national level.
4.2.2 DAP and MOP are the two major decontrolledand decanalised fertilizers, which may beimported freely.
DAP
4.2.3 The imports of 40.23 LMT of DAP coupledwith indigenous production of 19.67 LMT andthe opening stock of 0.90 LMT of DAP as on
RABI 2011-12 1st
April, 2011 resulted slightly less
4.1.3 The requirement of urea for Rabi 2011-12 has
been assessed at 162.80 LMT envisaging a
growth of about 4.31% over the sales of
156.08 LMT in Rabi 2010-11. The
requirement is being met from the opening
stocks taken together with estimatedproduction of 112.97 LMT and imports of
about 45,00 LMT during the season. Thus
the cumulative availability of urea for Rabi
2011-12 has been estimated to be about
157.97 LMT by the end of 31st
March, 2012.
4.1.4 Allocation of urea was restricted to 50% ofproduction of installed capacity of eachmanufacturer during Kharif 2011 and Rabi2011-12. The manufacturers are free to sellthe remaining quantity of urea to the farmers
availability of about 60.80 LMT DAP duringKharif 2011 season against the assessedrequirement of 71.38 LMT. The sales of DAPin Kharif 2011 were about 48.71 LMT.
MOP
4.2.4 The imports of 5.51 LMT of MOP takentogether with opening stock of 5.22 LMT as
on 1st
April, 2011 resulted in availability ofabout 10.73 LMT during Kharif 2011 seasonagainst the assessed requirement of 22.54LMT. The sales of MOP were reported asabout 7.00 LMT.
RABI 2011-12
DAP
4.2.5 The production of DAP during Rabi 2011-12 is
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estimated to be about 22.83 LMT. Stocks as
on 1.10.2011 coupled with estimated imports
will be adequate in meeting the country's
requirement of DAP assessed at 54.79 LMTduring Rabi 2011-12, considering that about
4.04 LMT of DAP will be surplus towards the
requirement of Rabi 2011-12.
During the current year, there is a shortage of
DAP because of the political disturbances in
the Middle East and gulf countries which is
main source of DAP import. During the Zonal
Conference organized by Department of
Agriculture and Cooperation (DAC), it was
clearly indicated to all the State Governmentsthat there will be a shortage of DAP fertilizer
during current year.
MOP
4.2.6 Stocks of MOP as on 1.10.2011 coupled with
adequate imports till March 2012 will ensure
that the country's requirement of MOP during
Rabi 2011-12 is fully met.
As regards MOP, there is tightness in
availability of MOP during current year.There is no viable source of Potash in the
country as such the entire demand of MOP is
met through imports. During the current year
up to the month of July, contracting for import
of MOP could not be materialized due to
s u b s t a n t i a l i n c r e a s e o f p r i c e s a n d
cartelization by MOP producers in the
International market. The contracting of MOP
took place only in the month of August. As a
result, MOP availability for direct application
as well as for indigenous production of NPK
fertilizers will be comfortable in Rabi 2011-12.
Following table summarizes the season-
wise position in respect of the availability and
sales of the major fertilizer i.e. Urea, DAP &MOP during the last three seasons:
Crop season Demand
Assessment
Cumulative
Availability
Cumulative
Sales
% age of
availability toassesseddemand
Kharif 2010UreaDAPMOP
136.6568.7522.98
132.1679.0127.51
126.0265.0519.63
96.71114.92119.71
Rabi 2010-11UreaDAPMOP
154.1452.1724.82
165.7746.6420.22
156.0847.6319.27
107.5489.4081.46
Kharif 2011Urea
DAPMOP
142.16
71.3822.54
146.23
60.8010.73
139.21
48.717.00
102.86
85.1747.60
4.3 MOVEMENT OF FERTILIZERS
4.3.1 Under the Allocation of Business Rules, theDepartment of Fertilizers has been entrustedthe responsibility of ensuring movement,distribution and allocation of controlledfertilizer, i.e. urea, from various fertilizerplants and ports in accordance with the State-w i s e r e q u i r e m e n t a s s e s s e d b y t h e
Department of Agriculture & Co-operation(DAC). The distribution of imported urea ismade keeping in view the requirements ofeach of the States.
4.3.2 The major share in transportation of fertilizersis of the Railways. During 2011-12, Railwayshad moved about 75% of the fertilizersproduced and/or imported in the country.
4.3.3 Judicious management of the demand-supply balance has helped in maintaining the
average lead of fertilizer movement by rail.During 2010-11 the average lead was 827KMs. During the current year the averagelead for the period April-November, 2011would also be almost same.
*****
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3
CHAPTER -5
5.1 PLAN PERFORMANCE
5.1.1 The installed capacity and production of
fertilizers in the country at the end of eighth
five year plan, in the terminal year of the ninth
plan and at the beginning of 5th
year of tenth
plan (2006-07) are indicated below:
5.1.3 Year-wise consumption, production and
imports of fertilizers in nutrients terms are
given in Annexure-V
5.1.4 The production of fertilizers in nutrient terms
during 2010-11 was 121.56 LMT of nitrogen
and 42.22 LMT of phosphate. The estimated
INSTALLED CAPACITY AND PRODUCTON OF NITROGENOUS AND PHOSPHATICFERTILIZERS IN EIGHT, NINTH AND TENTH FIVE YEAR PLANS.(In lakh MT(LMT))
Sr.No
Particulars At the end ofEighth Five Year Plan
(1996-97)
At the end of Ninth Plan( 2001-02).
At the beginning of 5t
year of Tenth Plan(2006-07)
1 Capacityi ) Nitrogenii) Phosphates
97.7729.05
120.5852.31
120.6156.59
2 Productioni ) Nitrogen
ii) Phosphates
85.99
25.56
107.68
38.60
115.78}
45.17}
5.1. 2 The installed capacity of nitrogen and
phosphate in the terminal year (1996-97) of
the eighth plan was 97.77 LMT and 29.05
LMT, respectively. Three major phosphatic
fertilizer plants were commissioned during
the ninth five year plan period, namely, Oswal
Chemicals & Fertilizers Ltd.-Paradeep ( since
t a k e n o v e r b y I F F C O ) , I n d o - G u l f
Corporation-Dahej and Gujarat StateF e r t i l i z e r s C o m p a n y L t d . - S i k k a - I I .
Consequent upon reassessment of urea
capacity on the basis of Dr. Y.K. Alagh
Committee and DAP capacity by Tariff
Commission, despite phasing out of 10 urea
units due to closure, the installed capacity of
nitrogen and phosphate has increased from
97.77 LMT at the end of eighth plan to 120.61
LMT and 29.05 LMT to 56.59 LMT
respectively during the same period.
production for 2011-12 is 125.76 LMT of
nitrogen and 44.32 LMT of phosphate.
Sector-wise targets and achievements inrespect of production and capacity utilization
from 2003-04 onwards are given inAnnexures-VI & VII respectively.
5.2 Plan Outlays
5.2.1 For the Eleventh Five Year Plan (2007-12),
Planning Commission has approved anoutlay of Rs.20627.87 crore consisting of
Rs.1492.00 crore as Domestic Budgetary
Support and Rs.19135.87 crore as Internal &Extra Budgetary Resources (IEBR).
5.2.2 For the year 2011-12, a plan outlay of
Rs.3550.22 crore was approved by the
Planning Commission with Rs.3325.22 crore
to be met out of IEBR and balance amount of
Rs.225.00 crore as budgetary support. The
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details of Plan outlays are given at made to three loss making PSUs, namely
Annexure-VIII. The gross outlay of BVFCL, FACT and MFL for meeting their
R s . 3 5 5 0 . 2 2 c r o r e i s f o r R a s h t r i y a
Chemicals & Fertilizers Limited (Rs.293.30crore), FAGMIL (Rs.4.15 crore), Project &
Development India Limited (Rs.9.73 crore),
National Fertilizers Limited (Rs.2363.08
crore), Krishak Bharati Cooperative Limited
(Rs.654.96 crore), Brahmaputra Valley
Fertilizer Corporation Limited (Rs.67.80
crore), Fertilizers & Chemicals Travancore
Limited (Rs.60.74 crore), Madras
Fertilizers Limited (Rs.88.95 crore), and
o t h e r M i s c e l l a n e o u s D e p a r t m e n t a lschemes such (MIS/IT and R&D) Rs.7.50
crore. Department of Fertilizers is exploring
possibilities of joint ventures abroad. Since
there is no firm proposal in hand right now,
only a token provision of Rs.0.01 crore has
been provided.
5.2.3 Out of the budgetary support provided by
the Government, bulk of allocation was
urgent capital expenditure requirement. A
small amount of Rs.2.00 crore wasearmarked for Grants-in-Aid to various
research institutes for carrying out relevant
research which may be beneficial to the
fertilizer industry in the field of fertilizer
sector under S&T Head. Similarly,
another small amount of Rs.5.50 crore was
earmarked for Management Information
Technology (MIT) scheme.
5.2.4 For the year 2011-12, there was net
Budgetary Provision (BE) of Rs 50,245
crore. Rs 225 crore under Plan and Rs 50,020
crore under Non-Plan. In the Revised
Estimates (RE) for 2011-12 the net provision
is Rs 68,225 crore, Rs 225 crore under Plan
and Rs 68,000 crore under Non-Plan. The
details of Non-Plan and Plan provisions in
FY 2011-12 (BE) and (RE) are given in
Annexure-IX.
*****
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3
CHAPTER -6
6.1 MEASURES OF SUPPORT FOR technology, feedstock used, the level ofFERTILIZERS capacity utilization, energy consumption,
6.1.1 For sustained agricultural growth and topromote balanced nutrient application, it isimperative that fertilizers are made availableto farmers at affordable prices. With thisobjective, urea being the only controlledfertilizer, is sold at statutorily notified uniform
sale price, and decontrolled phosphatic andpotassic fertilizers are sold at indicativemaximum retail prices (MRPs). The problemsfaced by the manufacturers in earning areasonable return on their investment withreference to controlled prices, are mitigatedby providing support under the New PricingScheme for urea units and the ConcessionScheme for decontrolled phosphatic andpotassic fertilizers. The statutorily notifiedsale price and indicative MRP is generally
less than the cost of production of therespective manufacturing unit. Thedifference between the cost of production andt h e s e l l i n g p r i c e / M R P i s p a i d a ssubsidy/concession to manufacturers. As theconsumer prices of both indigenous andimported fertilizers are fixed uniformly,financial support is also given on importedurea and decontrolled phosphatic andpotassic fertilizers.
6.2 MEASURES OF SUPPORT FOR UREA
6.2.1 Until 31.3.2003, the subsidy to ureamanufacturers was being regulated in termsof the provisions of the erstwhile RetentionPrice Scheme (RPS). Under RPS, thedifference between retention price (cost ofproduction as assessed by the Governmentplus 12% post tax return on networth) and thestatutorily notified sale price was paid assubsidy to each urea unit. Retention priceused to be determined unit wise, which
differed from unit to unit, depending upon the
distance from the source of feedstock/rawmaterials, etc. Though the RPS did achieveits objective of increasing investment in thefertilizer industry, and thereby creating newcapacities and enhanced fertilizer productionalong with increasing use of chemicalfertilizers, the scheme had been criticized forbeing cost plus in nature and not providingincentives for encouraging efficiency.
6.2.2 Given the importance of fertilizer pricing ands u b s i d i z a t i o n i n t h e o v e r a l l p o l i c yenvironment, which has direct implicationswith reference to the growth and developmentof agriculture and sustainability of the fertilizerindustry, the need for streamlining the subsidyscheme in respect of urea producing unitshad been felt for a long time. A High Powered
Fertilizer Pricing Policy Review Committee( H P C ) w a s c o n s t i t u t e d , u n d e r t h echairmanship of Prof. C.H. Hanumantha Rao,to review the existing system of subsidizationof urea, suggest an alternative broad-based,scientific and transparent methodology, andr e c o m m e n d m e a s u r e s f o r g r e a t e rcohesiveness in the policies applicable todifferent segments of the industry. The HPC,in its report submitted to the Government on
3rd
April 1998, inter-alia, recommended that
unit-wise RPS for urea may be discontinuedand, instead, a uniform Normative ReferralPrice be fixed for existing gas based ureaunits and also for DAP and a FeedstockDifferential Cost Reimbursement (FDCR) begiven for a period of five years for non-gasbased urea units.
6.2.3 The Expenditure Reforms Commission(ERC), headed by Shri K.P. Geethakrishnan,had also examined the issue of rationalizingfertilizer subsidies. In its report submitted on
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2 0t h
S e p t e m b e r 2 0 0 0 , t h e E R C power and water. Under the scheme, no
recommended, inter-alia, dismantling ofexisting RPS and in its place the introduction
of a Concession Scheme for urea units basedon feedstock used and the vintage of plants.
6.2.4 The recommendations of ERC wereexamined in consultation with the concernedMinistries/Departments. The views of thef e r t i l i z e r i n d u s t r y a n d t h e S t a t eG o v e r n m e n t s / U n i o n t e r r i t o r i e s , a n deconomists/research institutes were alsoobtained. After due examination of all theseviews, a New Pricing Scheme (NPS) for ureaunits for replacing the RPS was formulated
and notified on 30.1.2003. The new schemetook effect from 1.4.2003. It aims at inducingthe urea units to achieve internationallycompetitive levels of efficiency, besidesbringing in greater transparency andsimplification in subsidy administration.
6.2.5 New Pricing Scheme (NPS) for urea was
introduced w.e.f. 1stApril, 2003. The Stage-I
of NPS was of one year duration from 1stApril,
2003 to 31st
March, 2004 and Stage-II was of
reimbursement is allowed in respect of
investment made by a unit for improvement in
its operations nor are the gains as a result ofoperational efficiencies to be mopped up.
6.2.8 It has also been provided under the schemethat the concession rates during Stage-II shall
be adjusted for reduction in capital related
charges and enforcement of efficient energy
norms. Pre-set energy norms for urea units
during Stage-II of NPS have already beennotified and intimated to urea units.
Reduction in rates of concession during
Stage-II of NPS for urea units on account ofreduction in capital related charges have also
been notified and intimated to urea units.
6.3 PHASED DECONTROL OF UREA
DISTRIBUTION
6.3.1 As per the New Pricing Scheme for urea
units, it was also envisaged that decontrol of
urea distribution/movement will be carried outin a phased manner. During Stage-I, i.e.
from 1.4.2003 to 31.3.2004, the allocation of
two year duration from 1st
April 2004 to urea under the Essential Commodities Act31
stMarch, 2006. With the Stage-III of NPS
being implemented w.e.f. 1st
October, 2006,
the Stage-II of NPS stands extended upto 31st
September, 2006.
6.2.6 Under NPS, the existing urea units have beendivided into six groups based on vintage andfeedstock for determining the group basedconcession. These groups are : Pre-1992gas based units, post-1992 gas based units,
pre-1992 naphtha based units, post-1992naphtha based units, fuel oil/low sulphurheavy stock (FO/LSHS) based units andmixed energy based units. The mixed energybased group shall include such gas basedunits that use alternative feedstock/fuel to theextent of more than 25% as admissible on1.4.2002.
6.2.7 Under NPS, escalation/de-escalation is given
in respect of variable cost related to changesin the price of feedstock, fuel, purchased
1955 (ECA) was restricted up to 75% and50% of installed capacity (as reassessed) of
each unit in Kharif 2003 and Rabi 2003-04,
respectively. It was further envisaged thatduring Stage-II commencing from 1.4.2004,
urea distribution will be totally decontrolled
after evaluation of Stage-I and with theconcurrence of the Ministry of Agriculture.
6.3.2 The total decontrol of urea distribution was
deferred initially for a period of six monthsw.e.f. 1.4.2004 i.e., up to Kharif 2004, whichhas been subsequently deferred up to Rabi
2005-06 i.e., up to 31.3.2006. The existing
system of 50% ECA allocation and 50%
outside ECA allocation has been extended
upto 31-3-2010.
6.3.3 The pricing policy for urea units for Stage-IIIof New Pricing Schemes (NPS) which is
effective from 1.10.2006 to 31.3.2010 hasbeen formulated keeping in view the
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recommendations of the Working Group set
up under the Chairmanship of Dr. Y.K.
Alagh. The salient features of Stage-III
Policy which is aimed at promoting furtherinvestment in the urea sector, are tomaximize urea production from the Urea
units including through conversion of non-
gas based Units to gas, incentivizingadditional urea production and encourage
investment in Joint Venture (JV) projects
abroad. It is also aimed at establishing a
more efficient urea distribution and
movement system in order to ensureavailability of urea in the remotest corners of
the country.
6.3.4 The Stage-III policy seeks to promoteusage of most efficient and comparativelycheaper feed stock natural gas/LNG forproduction of urea in the country. The policylays down a definite plan for conversion ofall non-gas based urea units to gas. Atpresent, there are 8 urea units (MFL,SPIC,ZIL, MCFL, GNFC, NFL-Nangal, NFL-Bhatinda, NFL-Panipat) in the country
which are based on naphtha or FO/LSHS asfeed stock. All these 8 units are required toswitch over to natural gas/LNG within aperiod of next three years. Beyond this time
limit, the high cost urea produced by thesenon-gas based units will not be entitled tosubsidy at the existing levels and it will berestricted to import parity price of urea. Theunits, which are unable to tie up gas will
have to explore alternative feedstocks likeCoal Bed Methane (CBM) and coal gas.
SFC has started using gas w.e.f.22.9.2007.
6.3.5 The availability of gas is critical to thegrowth of urea industry in the country.
Presently, the indigenous availability is notsufficient to meet the demand of existing
gas based urea units in the country. To this
end, the Department of Fertilizers
constituted a Committee under the
chairmanship of Secretary(P&NG) with
S e c r e t a r y ( F e r t i l i z e r s ) , S e c r e t a r y
( E x p e n d i t u r e ) , S e c r e t a r y ( P l a n n i n g
Commission) as its members to deliberate
upon various issues relating to connectivity
and assured supply of gas to the fertilizersector. The Committee will also develop anappropriate mechanism for fixing the price
of the gas in a transparent manner. It wasexpected that the availability of gas in the
country will improve from 2008-09 onwardsand the new policy, taking into account the
above fact, has laid down specific timelines
for conversion of all non-gas based units in
the country to gas.
6.3.6 In order to incentivize conversion of non gas
based units to gas, the policy provides for a
regime where there will be no mopping up of
energy efficiency for a fixed period of five
years for naphtha based as well as
FO/LSHS based units. The policy also
recognizes the comparative higher cost ofconversion of FO/LSHS based units to gas
and provides for one time capital investmentassistance to these units for conversion to
gas during the next three years. A specific
policy to this effect has been announced bythe Government on 6
thMarch 2009..
6.3.7 The policy also lays down a formulation to
dis-incentivize high cost production from the
non-gas based units and to facilitate their
early conversion to gas. It is proposed that
these units may be allowed to produce
100% of capacity should they adhere to anagreed timetable for conversion to Gas and
tie up requisite Gas/CBM/Coal gas. If they
do not, they will be given only 75% of thefixed costs beyond 93% of capacity
utilization in the 1st
year (1.4.2007) and 50%
of the fixed cost beyond 93% capacity
utilization from 2nd
year (1.4.2008) onwards.
6.3.8 C o n s i d e r i n g t h e l i k e l y g r o w t h i n
consumption of urea in the years to come,
the policy seeks to encourage the existing
urea units to produce beyond 100% of their
installed capacities by introducing a system
of incentives for additional urea production
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subject to merit order procurement. The
policy of requiring prior Government
permission for additional urea production
has been dispensed with. All production
between 100% and 110% of the existing
reassessed capacity will be incentivized on
the existing net gain sharing formula
between the Government and the unit in the
ratio of 65:35 respectively with the proviso
that the total amount paid to the units after
including the component of variable cost will
be capped at the units own concession rate.
The units increasing production beyond
110% will be compensated at their
concession rate subject to the over all cap ofImport Parity Price (IPP). To the extent
Government does not require any quantities
o f a d d i t i o n a l p r o d u c t i o n , t h e u r e a
companies would be free to dispose of the
remaining quantities by way of export or
sale to complex manufacturers without any
permission. The policy also encourages
setting up of Joint Venture projects abroad
where gas is readily available at reasonable
p r i c e s . I t r e c o g n i z e s o u r h e a v y
dependence on imported raw materials/intermediates and feedstock in the fertilizer
sector and to properly leverage this
position, the policy seeks to create
s p e c i a l i z e d a g e n c y t o c o o r d i n a t e
investments abroad in fertilizer sector.
6.3.9 The policy seeks to rationalize distribution
and movement of urea and the system of
freight reimbursement with the objective of
ensuring availability of urea in all parts of the
country. The Government will continue to
regulate movement of urea up to 50% of
production depending upon the exigency of
the situation. The State Governments will
be required to allocate the entire quantity of
planned urea arrivals including both
regulated and de-regulated urea in district-
wise, month-wise and supplier-wise format.
The units will be required to maintain a
district level stock point and the subsidy will
be paid only when the urea reaches the
district. The monitoring of movement and
distribution of urea throughout the country
up to the district level will be done by an On
line Web based monitoring system. To
facilitate movement of fertilizers to far flung
area, the reimbursement of freight will be
based on actual leads for rail and road
movement. The rail freight will be
reimbursed as per the actual expenditure
and the road freight will be escalated as per
composite road transport index every year.
One time enhancement of 33% will be
granted on the road component of primary
freight to offset the impact of Supreme Courtdirective regarding maximum truck load
limit of 9 MT on road vehicles. The existing
special freight subsidy scheme will continue
for supply of urea to the North Eastern
States except Assam and Jammu &
Kashmir. In addition, the Department will
operate a buffer stock through the state
institutional agencies/fertilizer companies in
major urea consuming States up to a limit of
5% of the seasonal requirement.
6.3.10 The Stage-III of NPS seeks to carry on the
existing 6 group classification of urea
manufacturing units in the country with
updation of all costs upto 31st
March, 2003.
The respective pre-set energy consumption
norm of each urea units during Stage-II of
NPS or the actual energy consumption
achieved during the year 2003, whichever is
lower, will be recognized as the norm for
Stage-III of NPS. The policy also providesfor updation of costs on account of cost of
bags through 3 year moving weighted
average cost of bags to compensate for the
rise in prices for the last three years. It also
provides for payment of sales tax on input
and other taxes recognized under erstwhile
Retention Price Scheme, on actual basis.
6.3.11 NPS Stage-III seeks to take forward the
principles of uniformity and efficiency in
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urea production as enunciated during Stage I
and II of NPS and also aims at bringing in
more transparency in distribution of fertilizers
across the country. It is expected that thepolicy will encourage increase in indigenous
production from the existing urea units in the
country and facilitate early conversion of non-
gas based units to gas leading to substantial
savings in subsidy. It is also expected that
with the launch of Fertilizer Monitoring
System (FMS) to monitor movement of
fertilizers upto district level and the freight
rationalization proposed in the new policy, the
distribution of fertilizers in remote corners ofthe country will improve considerably without
any complaints of shortages in future. The
Department of Fertilizers will continue its
endeavour to promote the growth of fertilizer
industry in the country and ensure adequate
availability of fertilizers to the farmers.
6.4 AMENDMENTS TO STAGE III OF NEW
PRICING SCHEME (NPS)
6.4.1 The Stage-III of New Pricing Scheme (NPS)is being implemented w.e.f. 1
stOctober, 2006
and will be effective till March, 2010. In the
Policy proposal approved by CCEA, it was
mentioned that some urea units such as
Nagarjuna Fertilizers & Chemicals Ltd.
(NFCL), Kakinada, Southern Petrochemicals
Industries Corporation Ltd. (SPIC), Tuticorin
etc. has represented that the implementation
of group based NPS in place of unit specific
cost plus Retention Price Scheme (RPS) hasresulted in certain under recoveries of their
individual costs of production. It was
proposed to take appropriate action in these
cases on merits in consultation with
Department of Expenditure (DoE).
6.4.2 Accordingly, after notification of NPS-III on
8th March, 2007, a number of units have
represented to Department of Fertilizers
indicating the under recoveries on account of
various provisions of the group based NPS.
The issues raised by the units have been
examined within the Department and these
can be divided into two categories. The firstissue relates to losses due to group
averaging, and the second issue relates to
increase in capacity utilization norms for NPS
Stage-III.
6.4.3 It was found that some of the companies are
losing upto 85% of their fixed cost due to the
group averaging principle followed under
N P S - I I I , m a k i n g t h e i r o p e r a t i o n s
unsustainable from day one. Thus, there was
a need to limit the reduction due to averagingprocedure for various units so as to ensure
sustainability of production while encouraging
efficiency. It has been, therefore, decided to
restrict the reduction in fixed costs of a unit
due to group averaging under NPS-III to 10%
of the total fixed cost of the unit, w.e.f 1st April
2009 onwards.
6.4.4 It was also found that for all the companies
the capacity utilization norms have been
increased by 3% from NPS-II stage to NPS-III. However, for post-92 Naphtha based
group it has been increased by 8% on the
pretext that the units have converted to gas.
But since the cost of conversion is not borne
by GOI, an indiscriminate increase by 8% for
this group has put the units under this group at
a disadvantage. It was thus decided to take
capacity utilization for post 1992 naphtha
group at 95%, instead of earlier approved
98% under NPS-III, for calculation of notional
retention price of the units within the group, if
there has been no recognition of cost of
conversion under NPS-III.
6.5 UREA POLICY BEYOND NPS-III
6.5.1 The tenure of NPS Stage-III policy expired on
31st
March 2010. The provisions of the NPS-
III policy has since been extended
provisionally till further order. Now the policy
beyond NPS-III is under consideration of
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Government. The Group of Ministers (GoM)
constituted to review the fertilizer policy has
decided in its meeting held on 5th
January
2011 to constitute a Committee under the
Chairmanship of Dr. Saumitra Chaudhuri,
Member Planning Commission to examine
the proposal for introduction of NBS in urea,
including various options therefore, and make
suitable recommendations. The committee
has also to examine the issues relating
to investment policy and amendments
proposed therein, and make appropriate
recommendations.
6.5.2 The Committee constituted under the
Chairmanship of Dr. Saumitra Chaudhuri,
Member Planning Commission has submitted
its report on 26-04-2011 on the proposal for
Nutrient Based Subsidy in Urea sector. The
Group of Ministers, considered the report of
the Committee of Secretary in its meeting
held on 5thAugust 2011 and directed that the
proposal on Nutrient Based Subsidy (NBS)
for Urea may be placed before CCEA alongwith the proposal of Department of Fertilizers
and the views of Minister of Chemicals &Fertilizers and sought directions of CCEA.
Draft Note for consideration of CCEA wascirculated on 25-11-2011 for Inter-Ministerial
comments. Final CCEA Note, incorporating
comments of all Ministries/Departments, is
being finalised.
6.6 MRP OF UREA
6.6.1 The MRP of urea since 2003 was Rs. 4830/-
per tonne. The MRP of urea has increased to
Rs. 5310/- per tonne w.e.f. 1stApril 2010. TheMRP fixed is exclusive of CST, Sales Tax and
Central Excise Duty. There has been no
further increase in MRP of urea.
6.7 PRICING POLICY FOR INVESTMENT IN
FERTILIZER SECTOR
UREA
6.7.1 A pricing policy was announced on 29.1.2004
for setting up new urea projects and
expansion of existing urea projects for
augmenting the domestic production capacity
of urea to meet the growing demand for
enhancing the agricultural production in thecountry. The new policy aimed at enabling
the entrepreneurs to decide about their
investment plans in the fertilizer sector. The
new policy was expected to encourage
setting up of plants with international
efficiency standards for fresh investment in
new projects and expansion of existing units.
The policy was based on the principle of Long
Run Average Cost (LRAC).
6.7.2 The above policy was not successful inattracting investment in this sector. The non-
availability of natural gas, which is the critical
feedstock for production of urea, has also
been one of the major constraints in further
addition of indigenous capacity for production
of urea. However with the projected
improved availability of gas from 2009
onwards, it is expected that investment in
fertilizer sector will also take place. The
Government has recently announced on 4
th
September 2008, a new investment policy for
urea sector to attract the much required
investment in this sector. The policy is based
on IPP benchmark and has been finalized in
consultation with the industry.
6.7.3 The New Investment Policy aims at revamp,
expansion, revival of existing urea units and
setting up of Greenfield/ Brownfield projects.
The policy was notified keeping in view
adequate availability of gas at reasonableprices for new investments, which may result
in bridging the gap between the consumption
and domestic consumption. The policy has to
lead to savings to the Government in the form
of availability of Urea at a price below IPP. The
salient features of the new investment policy
are as under :-
I. The policy is based on Import Parity Price
(IPP) benchmarked with suitable floor
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and ceiling prices of USD 250/MT and VII. Allocation of Gas: Only non-APM gas
USD 425/MT respectively. will be considered for the new investmentin urea sector.
II. Revamp project: Any improvement in
capacity of existing plants throughinvestment upto Rs. 1000 crore, in the
existing train of ammonia-urea production
will be treated as revamp of existing units.
The additional urea from the revamp of
existing units will be recognized at 85% of
IPP with the floor and ceiling price as
indicated above.
VIII. Coal gasification based Urea Projects:The Coal gasification based urea projectswill also be treated on par with a revival ora Greenfield project as the case may be.In addition, any other incentives or taxbenefits as provided by Government forencouraging coal gasification technologywill also be extended to these projects.
IX. Joint Ventures abroad: The JointIII. Expansion projects: Setting up of a Venture projects abroad in gas rich
IV.
new ammonia-urea plant (a separate new
ammonia-urea train) in the premises of
the existing fertilizer plants, utilizing some
of the common utilities will qualify for
being treated as expansion project. The
investment should exceed a minimum
limit of Rs.3000 crore. The urea from the
expansion of existing units will be
recognized at 90% of IPP, with the floor
and ceiling price as indicated above.
Revival/Brownfield projects: The urea
from the revived units of Hindustan
Fertilizer Corporation Limited(HFCL) and
Fertilizer Corporation of India Limited
(FCIL) will be recognized at 95% of IPP
countries are also proposed to bee n c o u r a g e d t h r o u g h f i r m o ff t a k econtracts with pricing decided on thebasis of prevailing market conditions andin mutual consultation with the jointventure company. However, the principlefor deciding upon the maximum price willbe the price achieved under Greenfieldprojects or 95% of IPP as proposed forrevival projects (in absence of anyGreenfield projects) with a cap of USD
405 CIF India per MT and a floor of USD225 CIF India per MT (inclusive ofhandling and bagging costs)
X. Time period for proposed investment
with prescribed floor & ceiling price, if thepolicy: Only those revamp projects
revival of closed units takes placed in
public sector.
which start production of additionalcapacities within four years of notificationof the new policy would qualify for the
V. Greenfield projects: The pricing of dispensation recommended above.
Greenfield projects will be decided based
on a bidding process which will be for a
discount over IPP, after firming up of the
location (States) of the proposed new
plants.
Similarly production from expansion andrevival (brownfield) units that come about
within five years of notification of the newpolicy would qualify for dispensationprovided in the policy. If the productiondoes not come through within the
VI. Gas transportation charges: An stipulated time period, such brownfieldadditional gas transportation cost will be
paid to units undertaking expansion and
revival on the basis of actuals (upto 5.2
Gcal per MT of urea) as decided by the
Regulator(Gas) subject to a maximum
ceiling of USD 25 per MT of urea.
projects will be treated similar to aGreenfield projects wherein price will bedecided through limited bidding options.The time period for setting up of new JointVentures would also be five years underthe new investment policy.
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6.8 IMPACT OF INVESTMENT POLICY ON
FERTILIZER SECTOR
6.9 NUTRIENT BASED PRICING REGIME FOR
ALL SUBSIDIZED FERTILIZERS
6.8.1 The fertilizer Industry has responded 6.9.1 Keeping in view the interests of the farmers
positively towards the New Investment Policyby initiating investment decision for revamp of
and to promote balanced use of fertilizers, theDepartment of Fertilizers has notified on 17
th
existing capacities. The fertilizer units like June 2008 a nutrient based pricing regime forIFFCO-AonlaI & II, IFFCO-PhulpurI & II, all subsidized fertilizers. It has been furtherChambal Fertilizers and Chemicals Limited decided to fix the farmgate price of nutrients(CFCL) Gadepan I&II, Nagarjuna at the level of their existing price in straight
Fertilizers and Chemicals Limited (NFCL) fertilizers viz. Urea, DAP, MOP and SSP. This
Kakinada I & II and the unit of Tata will lead to significant reduction in existing
Chemicals Limited - Babrala have informed Maximum Retail Prices (MRPs) of complex
regarding availability of additional productionof urea after revamp. Further, RCF, Thal;KRIBHCO- Hazira and NFL, Vijaipur haveundertaken revamp of their units. As regardsexpansion projects, six companies viz.IFFCO, KRIBHCO, Rashtriya Chemicalsa n d F e r t i l i z e r s L i m i t e d , I N D O - G U L FFertilizers Limited, TATA Chemicals Limitedand Chambal Fertilizers and ChemicalsLimited have proposed to undertakeexpansion of their units. However, theseunits have expressed concern regardingpricing and firm availability of gas beforetaking final investment decision to undertakeexpansion of their existing units
6.8.2 The Group of Ministers(GoM) constituted toreview the fertilizer policy has decided in its
fertilizers. Under this regime, the farm gateprice of each nutrient will be uniform acrossall subsidized fertilizers. The selling price ofsubsidized fertilizers will be determined onthe basis of the nutrients contained therein
6.9.2 Under existing pricing regime, the price ofnutrients in complex fertilizers were higherthan the price of same nutrients in otherstraight fertilizers like Urea, DAP, MOP andSSP. This led to comparatively higher usageof straight fertilizers vis--vis complexfertilizers, which are agronomically better
fertilizer products. The nutrient based pricingwill lead to parity in price of complex fertilizerswith other straight fertilizers and, thus, isexpected to promote balanced fertilization byencouraging usage of complex fertilizers.
meeting held on 5th
January 2011 to6.9.3 POLICY FOR ENCOURAGING PRODUC-
c o n s t i t u t e a C o m m i t t e e u n d e r t h eChairmanship of Dr. Saumitra Chaudhary,Member Planning Commission to examinethe proposal for introduction of NBS in urea,including various options therefore, and
make suitable recommendations. Thecommittee has also to examine the issuesr e l a t i n g t o i n v e s t m e n t p o l i c y a n damendments proposed therein, and makeappropriate recommendations. The report ofthe Committee on Investment Policy in Urea
sector has been finalised and signed on 7th
January 2012. The report is being placedbefore the GoM for directions. A proposal toamend the New Investment policy is underconsideration of Government.
TION AND AVAILABILITY OF FORTIFIED
AND COATED FERTILIZERS IN THE
COUNTRY
Department of Fertilizers has notified on 2nd
June 2008 a policy for encouragingproduction and availability of fortified andcoated fertilizers in the country. In terms ofthis policy, the indigenous manufacturers/producers of the subsidized fertilizers area l l o w e d t o p r o d u c e f o r t i f i e d / c o a t e dsubsidized fertilizers up to a maximum of 20%of their total production of respectivesubsidized fertilizers. The manufacturers/producers are allowed to sell all the FCOa p p r o v e d f o r t i f i e d / c o a t e d s u b s i d i z e d
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fertilizers, except for Zincated Urea andBoronated SSP at a price up to 5% above theMRP of the subsidized fertilizer as indicated
in the table above. For Zincated Urea andBoronated SSP, the manufacturers areallowed to charge up to 10% above MRP ofUrea and SSP respectively. In January 2011,
report to Department of Fertilizers onFinalizing Per KM Per Tonne Rate forTransportation of Fertilizers by road. These
rates will be escalated by WPI (compositeroad transport index) every year. As per therecommendations made by the TariffCommission in their report, the Government
the ceiling of production of Neem Coated has issued a notification on 1st
Septemberurea which has been incorporated in
Schedule 1 of the Fertilizer Control Order,1985 has been increased from the existinglimit of 20% to a maximum of 35% of theirtotal production, company wise of theirrespective subsidized fertilizers.
6.9.4 P O L I C Y F O R U N I F O R M F R E I G H T
SUBSIDY ON ALL FERTILIZERS UNDER
THE FERTILIZER SUBSIDY REGIME
To ensure easy availability of fertilizers in allparts of the country, the Department of
2011 notifying the district wise revised roadtransportation rates for UREA dispatches by
all the units with effect from 1st
April 2008.The normative PTPK rate is to be annuallye
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