Indian fertilizer ministry approves new urea investment policy

The Indian government has approved a draft policy aimed at attracting investments worth as much as Rs.40,000 crore to boost production of urea, the country’s most widely used fertilizer.

Fertilizer minister M.K. Alagiri gave his consent to the draft document on Tuesday, according to two ministry officials, who declined to be identified.

The new policy seeks to give urea manufacturers a minimum 12% post-tax return on capital. The fertilizer ministry also proposed that the government compensate companies if the price of gas exceeded $14 per million British thermal units (mmBtu).

The draft policy will be circulated among various arms of the government, including the finance, commerce and agriculture ministries as well as the Planning Commission, before it is sent to the cabinet for approval.

If approved, the policy could add as much as 7-8 million tonnes (mt) to India’s domestic urea production capacity and offset the current shortfall.

As locally produced urea is cheaper, it will result in significant savings in the fertilizer subsidy bill. India produces 21-22 mt of urea a year, while it requires an annual 28-30 mt.