Fertilizer Ministry moots to remove guaranteed buyback clause

Details: Category: Industry Overview

Fertilizer Ministry has moved a proposal to the Cabinet to remove guaranteed buyback clause in the urea investment policy and adopt a bidding process to shortlist companies after the lucrative incentive led to a flood of applications for expanding capacities. In January, the ministry notified the New Investment Policy(NIP) 2012 -- approved by the Cabinet Committee on Economic Affairs in December last year -- to incentivise manufacturers for raising domestic urea output. Policy guaranteed buy-back of urea for eight years from start of production. Encouraged by this clause, 13 fertilizer firms applied for setting up new plant or expanding capacity of existing plant by about 16 million tonne. However, India needs an additional capacity of only 8 million tonne of urea to become self-sufficient. The domestic production stands at about 22 million tonne. According to sources, the ministry has moved a proposal before CCEA to remove the buy-back clause and introduce bidding process for short listing 4-5 applicants from among the 13 that have applied.