NEW DELHI, FEBRUARY 7: The department of fertilisers has decided that no new grassroot project for production of urea will be set up in the public, private and cooperative sector in the next three years.The department will review the position on the creation of new capacities in April 2001, as a gestation period of three years is required for commissioning of new urea plants.Interestingly, the government has decided that the new units will get no guarantee on the continuation of the existing retention pricing scheme (RPS) on a long-term basis. They may get subsidy support on the basis of long term marginal cost worked out on the basis of prices of feedstock, but the benefit of the RPS will be available only as long as it lasted.The department's decision assumes significance given the fact that with the removal of quantitative restrictions on the import of urea in the year 2001, pressure on the government for withdrawing RPS would increase.Chemicals and fertiliser minister Suresh Prabhu had earlierindicated that the long term fertiliser policy would stress on the gradual deregulation of the sector. The government's decision of not giving any commitment to the new units regarding RPS may well be a step in that direction.A check on the number of new units would also result in a check in the growth in the burgeoning subsidy bill, which is also supposed to be on the agenda of the long term fertiliser policy.The Fertiliser Association of India (FAI) views the government's decision regarding extension of RPS to new units as fair because new units which come up would know before-hand what they were in for.FAI chief economist Uttam Gupta said that if the government felt that it was not feasible to extend RPS to new units, it had every right to spell out new conditionalities to the industry and the industry could base its investment decisions accordingly. "The old units were set up on the assurance that they would be under the cover of the RPS. Since the decision will not affect their functioning,there is no question of the industry getting adversely affected because of the decision."The department's official release placed the government's decision on putting a check on the number of urea units on the fact that the country was almost self-sufficient in urea production and that urea imports, which worked out to be cheaper than domestic production, had been reduced to about 2 per cent of the total consumption in the last two years. Although no new grassroot project would be set up in the next three years, the public and cooperative sector projects that have already been proposed for consideration would be taken up. Gupta said that this was a good decision as the four new projects which were presently under consideration would be enough to take care of the additional fertiliser demand that would be generated in the next three years.The decision has been announced following the recommendation of the high-powered review committee on fertiliser pricing policy which had suggested that new ureaunits might be justified only on the strategic consideration of desirable minimum level of self-sufficiency.
