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Govt plan: Tell healthy PSUs to heal sick ones

The idea now is to provide “assured market and additional concessions” for these plants so that the “PSUs do not face any viability issues and their investments are fully protected.”

Written by Amitav Ranjan | New Delhi |
Updated: April 7, 2016 5:28:05 am

PRIME Minister Narendra Modi is holding a meeting Thursday to consider a roadmap from a panel of Secretaries by which profitable PSUs will be asked to revive closed-down urea plants of Hindustan Fertiliser Corporation (HFC) and Fertiliser Corporation of India (FCI).

This is a sharp departure from the Cabinet decision last year to restart FCI’s Sindri and Gorakhpur and HFC’s Barauni units by roping in private firms to bid for them.


On March 15, Niti Aayog chief executive officer Amitabh Kant made it clear at a meeting of Secretaries that “financially sound PSUs NTPC, Oil & Natural Gas Corp and CIL should be mandated to revive these units as has been decided at the highest level.”

Incidentally, these three closed urea units were among eight closed by the previous NDA government following Cabinet approval on September 5, 2002 even as the Sindri plant was fully utilising its production capacity and was given the “Best Production” award after coming out of the sick category.

Sources said the onus to revive the sick units fell on PSUs following “poor response” of the investors to an auction for Sindri and Gorakhpur after a Request for Quotation (RFQ) was floated last September seeking private sector interest.

For each location, FCI was to provide land and infrastructure for 33 years to the successful bidder for a fee payable in four yearly instalments. The investor would have to set up a 1.27- million-tonne plant (initial cost estimate: Rs 6,000 crore) and share the annual revenue with FCI irrespective of its profit or loss.

“In view of single response against each RFQ, the bidding process was cancelled…In spite of several decisions of the Empowered Committee to attract investors, the RFQ for revival of these units were not successful and it is apprehended that investors’ response may remain subdued even after making the terms and conditions more attractive,” the Fertiliser Secretary said at the meeting, according to records accessed by The Indian Express.

The idea now is to provide “assured market and additional concessions” for these plants so that the “PSUs do not face any viability issues and their investments are fully protected.”

While deciding that the revival scheme would be “fast tracked,” Niti Aayog wants Department of Fertilisers to prepare “detailed information brochure of each unit highlighting all the assets including its land and other infrastructure, the required investment, the expected returns on investment and other supports to be provided by the government.”

Another concession being talked about is viability gap funding to GAIL Ltd in pumping Rs 8,000 crore for the first phase of Jagdishpur (Uttar Pradesh)-Haldia (West Bengal) pipeline project that would feed natural gas to these three plants.

GAIL, however, wants the Centre to provide “capital grant/compensation on loss of revenue due to less utilization of the pipeline network during the early years of its operation.”

GAIL also wants the Centre to direct the Petroleum & Natural Gas Regulatory Board to take a lenient stand while fixing transportation tariff on grounds of securing equitable distribution and adequate availability of gas in public interest.

NDA’s revival proposal is borrowed from UPA’s approval in April 2007 to restart all eight plants. An Empowered Committee of Secretaries recommended the revival of FCI’s Sindri, Ramagundam and Talchar units on nomination and the rest via open bidding process.

On March 31 last year, the NDA Cabinet approved the revival of HFC’s Barauni and FCI’s Gorakhpur both non-operational since 2004. This was followed two months later by a similar approval to restart the Sindri plant that last produced urea in 2002.

Besides Niti Aayog officials, the March 15 meeting was attended by officials of Finance, Fertiliser, Coal, Petroleum and Power along with GAIL and NTPC officers.



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