NTPC, CIL pursue tax sops for revival of shut urea units in India

 

In an attempt to ensure better returns for their efforts to revive the closed urea units in Uttar Pradesh (UP), Bihar and Jharkhand, a joint venture (JV) firm of state-run NTPC Ltd and Coal India Ltd (CIL) has sought tax exemptions from the government.

 

These units at Gorakhpur, Sindri and Barauni will require an investment of Rs.18,000 crore and are part of the government’s plan to revive the rural economy by focusing on irrigation and urea availability.

 

In June, NTPC and CIL formed a JV company—Hindustan Urvarak and Rasayan Ltd (HURL)—with an equal share for the revival of Gorakhpur (UP) and Sindri (Jharkhand) plants of Fertiliser Corporation of India Ltd (FCIL). The Barauni plant in Bihar is owned by Hindustan Fertiliser Corp. Ltd (HFCL).

 

“The JV company has written to the fertiliser ministry asking for tax exemptions on central sales tax, service tax on construction equipment and other related taxes so that the internal rate of returns (IRRs) are better,” said a senior government official on condition of anonymity.

 

These issues will be taken up by the inter-ministerial committee (IMC) shortly, which has been formed to expedite the revival of three sick fertiliser units. The IMC comprises of secretaries of the ministries of chemicals and fertilizers, coal, power, petroleum and natural gas, and finance along with the chief executive officer of National Institution for Transforming India (Niti) Aayog, Amitabh Kant, as reported by InfraCircle on 26 July. 

 

“IMC has asked to expedite induction of Indian Oil Corp. Ltd (IOC), FCIL and HFCL into the JV and also arrange manpower for the same,” said another government official who did not want to be identified.

 

According to information available on the website of the ministry of chemicals and fertilizers, the revival of these plants is expected to create 3,000-4,000 jobs for the skilled workforce.

 

“There are certain other issues related to land and water requirement in these projects, which needs to be addressed,” the official added.

 

The Cabinet Committee on Economic Affairs, headed by Prime Minister Narendra Modi, on 13 July approved the revival of three closed urea plants through a special purpose vehicle, to be formed by NTPC, CIL and IOC. The public sector units may infuse Rs.5,000 crore with the remaining amount to be raised as debt.

 

Queries emailed to the spokespersons of NTPC, CIL, and ministry of chemicals and fertilisers on 19 September remained unanswered.

 

Experts believe that certain concessions need to be given to PSUs to make the project financially viable.

 

“These companies are going to invest public funds into the project. If the viability of the project is not evident, then there is no use of making such large investments. Also, the urea units may be made viable by giving away certain tax concessions,” said Partha Bhattacharya, former chairman and managing director of CIL. 

 

With the price of urea, the most commonly used fertiliser in India, being controlled and currently sold at a fixed price of Rs.5,360 per tonne, any increase in production will result in savings thereby helping the government which has made a provision of Rs.70,000 crore on account of fertiliser subsidies in the Union budget of 2016-17. The industry is compensated in the form of subsidy for the difference between production cost and selling price.

 

India’s total urea production is likely to increase to 25 million tonne (MT) in the financial year 2016-17. The country’s has a urea demand of 32 MT and witnessed a record production of 24.5 MT of urea in the last financial year.