Annual Report2012 13

8/11/2019 Annual Report2012 13

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Annual Report

2012-13

Government of IndiaMinistry of Chemicals and Fertilizers

Department of Fertilizers


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S.No. Subjects Page No.

1. Introduction 1 - 3

2. Organisational set-up and functions 5 6

3. Development and Growth of Fertilizer Industry 7 16

4. Availability and Movement of Major fertilizers during 2012-13 17 19

5. Plan Performance 21 22

6. Measures of support for fertilizers 23 58

7. Public sector Undertakings 59 103

8. Fertilizer Education Projects 105 106

9. Information Technology (IT) 107 110

10. Vigilance Activities 111 111

11. Right to Information Act, 2005 113 113

12. Progressive use of Official Language 115 117

13. Welfare of SCs, STs, OBCs and Physically Handicapped 119 120

Persons

14. Women Empowerment 121 123

15. Sevottam 125 126

16. Annexure I to XVI 127 168

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CONTENTS


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Annual Report 2012-13

Chapter - 1

Introduction

1.1.1. Agriculture which accounts for one fifthof GDP, provides sustenance to two-

thirds of our population. Besides, it

provides crucial backward and forward

linkages to the rest of the economy.

Successive five-year plan have laid

stress on self-sufficiency and self-

reliance in foodgrain production and

concerted efforts in this direction have

resulted in substantial increase in

agriculture production and productivity.

This is clear from the fact that from a

very modest level of 52 million MT in

1951-52, foodgrain production rose to

about 259.32 million MT in 2011-12. In

India's success in agriculture sector, not

o n l y i n t e r m s o f m e e t i n g t o t a l

requirement of food grains but also

generating exportable surpluses, the

significant role played by chemical

fert i l izers is wel l recognized and

established.

1.1.2 Keeping in view the vital role played by

chemical fertilizers in the success of

India's green revolution and consequent

self-reliance in food-grain production,

the Government of India has been

consistently pursuing policies conducive

t o i n c r e a s e d a v a i l a b i l i t y a n d

consumption of fertilizers in the country.

As a result, the annual consumption of

chemical fertilizers in nutrient terms (N,

P & K), has increased from 0.7 lakh

MT in 1951-52 to 277.39 lakh MT 2011-

12, while per hectare consumption of

chemical fertilizers, which was less than

1 Kg in 1951-52 has risen to a level of

141.30 Kg (estimated) in 2011-12.

1.1.3 As of now, the country has achieved75% self-suff iciency in production

capacity of urea with the result that

India could substantially manage its

requirement of nitrogenous fertilizers

through the indigenous industry and

imports. Similarly, 50% indigenous

capacity has developed in respect of

phosphatic fertilizers to meet domestic

requ i rements . However , the raw

materials and intermediates for the

same are largely imported. As for

potash (K) since there are no viable

sources/reserves in the country, its

entire requirement is met through

imports.

1.2.1. The industry made a very humble

beginning in 1906, when the first

manufacturing unit of Single SuperPhosphate (SSP) was set up in Ranipet

near Chennai with an annual capacity

of 6000 MT. The Fertilizer & Chemicals

Travancore of India Ltd. (FACT) at

Cochin in Kerala and the Fertilizers

Corporation of India (FCI) in Sindri in

Bihar ( now Jharkhand) were the first

large sized -fertilizer plants set up in

the forties and fifties with a view to

establish an industrial base to achieve

s e l f - s u f f i c i e n c y i n f o o d - g r a i n s .

Subsequently, green revolution in the

late sixties gave an impetus to the

growth of fertilizer industry in India and

the sevent ies and e ight ies then

witnessed a significant addition to the

fertilizer production capacity.

GROWTH OF FERTILIZER INDUSTRY

1


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1.2.2 The installed capacity as on 31.03.2012

has reached a level of 120.41 lakh MT

of nitrogen and 56.19 lakh MT of

phosphatic nutrient, making India the

3rd largest fertilizer producer in the

world. The rapid build-up of fertilizerproduction capacity in the country has

been ach ieved as a resu l t o f a

favourable policy environment facilitating

large investments in the public, co-

operative and private sectors.

1.2.3 Presently, there are 30 large size urea

plants in the country manufacturing

urea (as on date 29 are functioning),

21 units produce DAP and complex

fertilizers, 5 units produce low analysis

straight nitrogenous fertilizers and the 2manufacture Ammonium Sulphate as

by-product. Besides, there are about 85

medium and small-scale units in

operation producing SSP. The sector-

wise installed capacity is given in the

table below: -

S E L F -S UF F I C I E NCY I N F E RT I L I Z E R

SECTOR

1.3.1 Out of three main nutrients namely

Nitrogen, Phosphate and Potash,

(N, P & K) required for various crops,

indigenous raw materials are available

mainly for nitrogenous fertilizers. The

Government's policy has hence aimed

at achieving the maximum possible

degree of sel f -suf f ic iency in the

production of nitrogenous fertilizers

based on util isation of indigenous

feedstock. Prior to 1980, nitrogenous

fertilizer plants were mainly based on

naphtha as feedstock. A number of

Fuel Oil/LSHS based ammonia-urea

plants were also set up during 1978 to

1982. In 1980, two coal-based plants

were set up for the first time in the

country at Talcher, (Orissa) and

Ramagundam (Andhra Pradesh). These

coal based plants have, however, been

closed by Government w.e.f. 1.4.2002

due to technical and financial un-

viability. However, with natural gas

becoming avai lable f rom offshore

Bombay High and South Basin, a

number of gas based ammonia-urea

plants have been set up since 1985. As

the usage of gas increased and its

available supply dwindled, a number of

expansion projects came up in the last

few years with duel feed facility using

both naphtha and gas. Feasibility of

making available Liquefied Natural Gas

SECTOR-WISE, NUTRIENT-WISE INSTALLED CAPACITY OF FERTILIZER

MANUFACTURING UNITS (as on 31.03.2012.)

Sr

No

Sector Capacity (lakh MT) Percentage Share

N P N P

1

2

3

Public Sector

Cooperative Sector

Private Sector

34.98

31.66

53.78

4. 02

17.03

35.14

29.04

26.29

44.67

7.15

30.31

62.54

Total:

120.47

56.19

100.00

100.00

Department of Fertilizers 2


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(LNG) to meet the demand of existing

fer t i l i zer p lants and/or for the i r

expansion projects along with the

possibility for utilising newly discovered

gas reserves, is also being explored by

various fertilizer companies in India.

1.3.2. In case of phosphates, the paucity of

domestic raw material has been a

constraint in the attainment of self-

sufficiency in the country. Indigenous rock

phosphate supplies meet about 10% of

the total requirement of P2O5. A policy

has, therefore, been adopted which

involves mix of three options, viz,

domestic production based on indigenous

/imported rock phosphate, importedsu lphur and ammonia ; domest ic

production based on indigenous/ imported

intermediates, v iz . ammonia and

phosphoric acid; and third, import of

finished fertilizers.

1.3.3. In the absence o f commerc ia l l y

exploitable potash sources in the

country, the entire demand of potassic

fertilizers for direct application as well

as for production of complex fertilizers

is met through imports.

1.3.4. Given the volatil ity in international

market for fertilizer in general and urea

market in particular, strategic imports

could be used to the country's strategic

advantage. This is also desirable as

the international market, especially in

case of urea, is very sensitive to

demand supply scenario. Under the

new pricing regime for urea units

applicable from 01.04.2003, for securing

additional indigenous supply of urea,

economically efficient units are beingpermitted to produce beyond their re-

assessed capac i ty to subst i tute/

minimize imports.

1.3.5 Government has recently announced

New Investment Policy-2012 in order

facilitate fresh investments in urea

sector.



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2.1.1 The main activities of Department of

Fertil izers (DOF) include planning,promotion and development of the

fertilizer industry, planning and monitoring

of production, import and distribution of

fertilizers and management of financial

assistance by way of subsidy/concession

for indigenous and imported fertilizers. A

list of activities being carried out by the

Department of Fertilizers is given at

Annexure-I.

2.1.2 The Department is broadly divided into

5 Wings dealing with (i) Fertilizers

Projects and Planning (ii) Fertilizers

Imports, Movement and Distribution

(iii) Administration and Vigilance (iv)

Finance and Accounts and (v) Economic

and Statistics. The work of these Wings

is be ing handled by three Jo in t

Secretaries, one Economic Adviser & one

Addi tional Secretary cum Financ ia lAdviser.

2.1.3 One Joint Secretary looks after

the work relating to Fertilizer Policy

of decontrolled (P&K) Fertilizers and

subsidy payment of de-control led

(P&K) Fertilizers in imported Urea on

Government account, domestic Joint

Venture projects of P&K Fertilizers, SPV

for exploring JVs abroad, Revival ofclosed Urea units and work relating to

FCIL & HFCL.

2.1.4 Second Joint Secretary is entrusted

wi th a l l work re lat ing to Branch

Administration including parliamentary

work and coordination, IT initiatives,

plan and Budget coordination, WTO

issues, all works related to PSUsexcluding vigilance matters, Sovereign

Funds and SPV (UVL) and general

coordination for overseas JVs including

related off takes. This Joint Secretary is

also Executive Director of the Fertilizer

Industry Coordination Committee.

2.1.5 Third Joint Secretary looks after the

work relating to Urea Policy and

domestic Urea Fert i l izer projects,Movements of Fertilizers and related

policies and coordination with States,

Shipping and Import of Urea on

Government Account including policy

matters on these subjects, Chief

Vigilance Officer of the Department and

vigilance matters related to PSUs, FMS

including direct cash transfer of subsidy,

OMIFCO matters including off-take of

Urea.

2.1.6 The Economic Adviser, a Joint Secretary

level officer, advises the Department on

various economic issues which have

economic implications, S&T projects,

matters relating to Agriculture Ministry

such as Bio fert i l izers, balanced

fertilizers, soil health cards, nutrient

absorption issues, micro-nutrients,

organic fertilizers based on urban solidwaste, subject related to renewable and

non-renewable energy, clean technology

and general environmental issues,

supply, demand, availability and price

movement forecast ing of var ious

fert i l izers, intermediates and raw

materials. Economic analysis of specific

Chapter - 2

Organisational set up and functions



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importance assisting in firming up policy

issues, analysis of domestic fertilizer

industry specially with reference to

investment climate including fiscal and

financial policy issues and quarterlyreview of CPSUs.

2.1.7 The l ist contain ing the names of

Minister-in-charge and the officers of the

level of Deputy Secretary and above,

who are working in the Department

during 2012-2013 (as on 31.1.2013) is

given in Annexure-II and a list of nine

Public Sector Undertakings and one

Cooperative under the administrativecontrol is given at Annexure-III.

2.2.1 The o f f i ce o f Fer t i l i zer I ndus t ry

Coordination Committee (FICC) is an

attached office under the Department of

Fertilizers headed by an Executive

Director. FICC, was initially constituted

w.e.f. 01.12.1977 to administer and

operate the erstwhile Retention Price

cum Subsidy Scheme (RPS). The RPS

stimulated indigenous production and

consumption of fertilizers in the country.

However, for attaining greater internal

efficiencies and global competitiveness,

unit specific approach of RPS was

replaced by a group based concession

FERTILIZER INDUSTRY COORDINATION

COMMITTEE (FICC)

scheme called the New Pricing Scheme

(NPS) from 01 April, 2003. The FICC

continues under the New Pricing Scheme

for administration of the scheme for

domestically produced urea.

2.2.2 FICC is responsible to evolve and

review periodically, the group conce-

ssion rates including freight rates

for units manufacturing nitrogenous

fertilizers, maintain accounts, make

payments to and to recover amounts

from fertilizer companies, undertake

costing and other technical functions

and collect and analyse productiondata, costs and other information.

2.2.3 The Fertil izer Industry Coordination

Committee comprises of the Secretaries

to the Government of India in the

Department of Fertilizers, Industrial

Policy and Promotion, Agriculture and

Cooperation, Expenditure, Ministry of

Petroleum & Natural Gas, Chairman,

Tariff Commission and two represen-

tatives of the urea industry namely

Mr R G Rajan, CMD, RCF and Dr A C

Muthiah, Chairman, SPIC.

2.2.4 The pricing policy for period beyond

31.03.2010 is under finalization and

extended NPS-III is being administered

till such time.



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CAPACITY BUILD-UP

PRODUCTION CAPACITY AND CAPACITY

UTILISATION

3.1.1 At present, there are 30 large size

f e r t i l i z e r p l a n t s i n t h e c o u n t r y

manufacturing urea (as on date 29 are

functioning), 21 units produce DAP and

complex fertilizers, 5 units produce low

analysis straight nitrogenous fertilizers

and the 2 units manufacture ammonium

sulphate as by-product. Besides, thereare about 85 medium and small-scale

units in operation producing SSP. The

total installed capacity of fertil izer

production which was 119.60 lakh MT of

n i t r ogen and 53 . 60 l ak h M T o f

phosphate as on 31.03.2004 has

marginally increased to120.42 lakh MT

of nitrogen and 56.19 lakh MT of

phosphate as on 01.04.2012.

3.2.1 The production of fertilizers during 2011-

12 was 122.59 lakh MT of Nitrogen and

41.04 lakh MT of Phosphates. The

production target for 2012-13 was 129.21

Lakh MT of Nitrogen and 47.55 Lakh MT

of Phosphates, representing a growth

rate of 5.4% in Nitrogen and 15.9% in

Phosphate as compared to production

in 2010-11. Product ion target for

nitrogenous fertilizer is more than the

installed capacity. The production target

for phospahtic fertilizer is less than

installed capacity due to constraints inavailability of raw materials/intermediates

which are substant ial ly imported.

However, taken together, the production

of 'N' and 'P' during the year is very near

to the corresponding period of last year.

3.2.2 The production performance of both

nitrogenous and phosphatic fertilizers

during the year 2011-12 was satis-

factory. Production of nitrogenous &

phosphatic was less than the target

by 4.98 Lakh MT and 8.2 Lakh MT

respectively.

3.2.3. The installed capacity of urea units in

the country as follows:-

UREA UNITS SET UP BETWEEN: 1967-2005 WITH REASSESSED CAPACITY

Year of

Comm.

Unit Sector Feedstock Installed Capacity

(lakh/MT)1967 GSFC-Baroda Private Gas 3.706

1969 SFC-Kota Private Naphtha 3.790

1970 DIL-Kanpur Private Naphtha 7.220

1971 MFL-Madras Public Naphtha 4.868 @

1973 ZIL -Goa Private Naphtha 3.993

Chapter - 3

Development and Growthof Fertilizer Industry



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Year of

Comm.

Unit Sector Feedstock Installed Capacity

(lakh/MT)

1975 SPIC-Tuticorin Private Naphtha 6.200

1976 MCFL-Mangalore Private Naphtha 3.800

1978 NFL-Nangal Public FO/LSHS 4.785

1978

IFFCO-Kalol

Coop.

Gas

5.445 @

1979

NFL-Bhatinda Public

FO/LSHS

5.115

1979

NFL-Panipat

Public

FO/LSHS

5.115

1981

IFFCO-Phulpur

Coop.

Gas

5.511

1982

RCF-Trombay-V

Public

Gas

3.30

1982

GNFC-Bharuch

Private

FO/LSHS

6.360

1985

RCF-Thal

Public

Gas

17.068

1986

KRIBHCO-Hazira

Coop.

Gas

17.292

1987

BVFCL-Namrup-III

(Formerly HFC)

Public

Gas

3.150

1988

NFL-Vijaipur

Public

Gas

8.646

1988

IFFCO-Aonla

Coop.

Gas

8.646

1988

Indogulf-Jagdishpur

Private

Gas

8.646

1992

NFCL-Kakinada

Private

Gas

5.970

1993

CFCL-Gadepan Private

Gas

8.646

1994

TCL-Babrala

Private

Gas

8.646

1995

KRIBHCO SHYAM-

Shahja-

hanpur

(Formerly OCFL)

Private

Gas

8.646

1996

IFFCO-Aonla

expansion

Coop.

Gas

8.646

1997

NFL-Vijaipur

expansion

Public

Gas

8.646

1997

IFFCO-Phulpur

expansion

Coop.

Gas

8.646

1998

NFCL-Kakinada

expansion

Private

Naphtha

5.970

1999

CFCL-Gadepan Private

Naphtha/Gas

8.646

Department of Fertilizers

2005 BVFCL:Namrup-II Public Gas 2.400 @

Note: @ After revamp

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3.2.4 The following 9 urea plants of the

companies are present ly c losed/

under shutdown due to various reasons,

inter-alia, on account of technological

absolescence, feedstock limitation, non-

viability of unit/company and heavy

financial losses :-

Sl.

No.

Name of the

Company

Place Date of closure Annual Installed

Capacity (In Lakh MT)

1. FCI Gorakhpur 10.6.1990 2.85

2. FCI Ramagundam 1.4.1999 4.95

3. FCI Talcher 1.4.1999 4.95

4. FCI Sindri 16.3.2002 3.30

5. HFC Durgapur 1.7.1997 3.30

6. HFC Barauni 1.1.1999 3.30

7. RCF Trombay-I 1.5.1995 0.98

8. NLC Neyveli 31.3.2002 1.53

9. FACT Cochin-I 15.5.2001 3.30

Total 28.46

is expected to improve further through

revamping/modernisation of the existing

plants.

3.2.7 The unit-wise details of installed capacity,

production and capacity util isation

during 2010-11 and 2011-12 are given in

Annexure-IV.

3.3.1 The fo l lowing s tra tegy has been

adopted to increase fertilizer production:

Expansion and capacity addition/

efficiency enhancement through

retrofitting / revamping of existing

fertilizer plants.

STRATEGY FOR GROWTH

3.2.5. The domestic fertilizer industry has

by and large attained the levels of

capacity utilisation comparable with

others in the world. The capacity

utilisation during 2010-11 was 100.9%

for nitrogen and 75% for phosphate.

The capacity utilisation during 2011-12

is 101.8 % of nitrogen and 72.9% of

phosphate. Within this gross capacity

utilization, the capacity utilisation in

terms of the urea plants was 109.2% in

2010-11 and 109.8% in 2011-12. As for

phosphate fertilizers, apart from the

constraints mentioned earlier, the actual

production capacity utilisation has also

been influenced by the demand trends.

3.2.6 The capacity utilisation of the fertilizer

industry, particularly in respect of urea,


Note: Production by DIL-Kanpur (7.22 LMT) was suspended due to financial constraints

9


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Setting up joint venture projects in

countries having abundant and

cheaper raw material resources.

Working out the possibility of using

alternative sources like liquefied

natural gas, coal gasification, etc.,

to overcome the constraints in the

domestic availability of cheap and

clean feedstock, particularly for the

production of urea.

Looking at possibilities of revival of

some of the closed units by setting

up Brownfield units subject toavailability of gas.

3.4.1 At present natural gas based plants

account for 80% of urea capacity,

naphtha is used for 9% urea capacity

and the balance 11% capacity is based

on fuel oil and LSHS as feed stock.

T h e t w o c o a l b a s e d p l a n t s a tRamagundam and Talcher were closed

down due to technological obsole-

scence and non-viability.

3.4.2 Natural gas has been the preferred

feedstock for the manufacture of urea

over other feed stocks viz. naphtha and

FO/LSHS, firstly, because it is clean

and efficient source of energy and

secondly, it is considerably cheaper and

more cos t e f fec t i ve in terms of

manufacturing cost of urea which also

has a direct impact on the quantum of

subsidy on urea.

3.4.3 Accordingly, the pricing policy, annou-

nced in January 2004, provides that

FEEDSTOCK POLICY

new urea projects, expansion of existing

urea units and capacity increase

t h r o u g h d e - b o t t l e n e c k i n g /

revamp/modernization will be also

allowed/recognized if the production

comes from using natural gas/LNG asfeedstock. For the same reasons, a

policy for conversion of the existing

naphtha/FO/LSHS based urea units to

natural gas/LNG as feedstock has also

been formulated in January 2004, which

encourages early conversion to natural

gas/LNG pursuant to formulation of

policy for conversion of non gas urea

units to gas, three naphtha based

plants namely, Chambal Fertilizers &Chemicals Limited (CFCL), Gadepan- II

and IFFCO Phulpur I & II have

already converted to NG/ LNG. Shriram

Fertilizers & Chemicals Limited (SFC)

Kota has also started using gas w.e.f.

22th September 2007. Four Urea units,

three of NFL and one of GNVFC

representing about 11% of domestic

urea capacity are expected to be

converted into gas based units byMarch 2013.

3.5.1. Urea (N) is the only fertilizer, the

requirement of which is largely (around

8 0 % ) m e t t h r o u g h i n d i g e n o u s

resources. The production of urea using

natural gas as feedstock is energy

efficient and cheaper. The fertilizer

sector has been treated as a priority

sector along with power in the context

of allocation of domestic gas. One of

the most important factors to be

considered while deciding the priority of

allocation of Gas is that fertilizer sector

REQUIREMENT AND AVAILABILITY OF

GAS TO FERTILIZER SECTOR



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is the only sector which uses both the

heat value and chemical components of

Gas. Further, the Hydrogen content in

gas is maximum, to the extent of about

25% as compared to about 15% in

Naphtha / FO/LSHS, whereas very lessin coal. All other sectors use only heat

value of the Gas. Other sectors may

use alternate fuels e.g. Coal, Fuel

Oil/LSHS etc. whereas fertilizer sector

has constraint to use alternate fuels.

3.5.2. Department of Fertilizers has projected

the following requirements of natural

gas for allocation by the Ministry of

Petroleum & Natural Gas:-

Requirement

of daily Gas

( 2012-13)

Additional

Gas

requirement

of natural gas

(2013-14)

Additional

Gas

requiremen

t of natural

gas (2016 -

17)

mmscmd mmscmd mmscmd

A Naphtha based

1 ZACL-Goa 0.00 1.28

2. MCFL-Mangalore 0.00 1.00

3 SPIC-Tuticorin 0.00 1.66

4. MFL-Manali 0.00 1.54

I Sub-Total of Naphtha

based plants

0.00 5.48

B Fuel-oil Based

5. NFL-Panipat 0.00 0.90

6. NFL-Nangal 0.00 1.0

7. NFL-Bathinda 0.00 0.90

8. GNVFC-Bharuch 0.00 0.95

II Sub-Total of Fuel-Oil

Based

0.00 3.75

C Gas Based

9. BVFC-Namrup-III 1.04

10. IFFCO-Aonla-I 4.480

11. IFFCO Aonla - II



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12. Kribhco-Hazira 4.950

13. NFL-V Pur 4.250

14. NFL-V Pur Exp.

15. KSFL - Shahjahanpur 2.253

16.

CFCL-Kota

2.120

17. TATA 2.169

18. NFCL-Kakinada 3.2

19. NFCL-Kakinada exp

20. Indogulf - Jagdishpur 2.230

21. RCF Trombay-V 2.050

22. IFFCO-P,PUR Exp. 3.700

23. IFFCO-P, Pur Exp.

24. SFC-Kota 0.620

25. CFCL-II 2.040

26. GSFC Baroda 2.486

27. IFFCO Kalol 1.300

28. RCF-Thal 4.750

29. BVFC-Namrup II 0.98

III Sub-Total of Gas Based 44.618

IV Green Field Projects

(Matrix Fert. 7 Chem.

Burdwan)

2.4 (0.5 CBM

and 1.9 NG)

V Expected

expansion/Brownfield units

(8 Units)

8*2.4=19.2

VI Revival units (Ramagundan

and Sindri)

2*2.4=4.8

Sub

Total

47.108 11.63 24



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3.5.3. Gas pipeline connectivity - Connectivity

to all FO/LSHS and Naphtha based

urea units converting to gas, revival of

Details of Natural Gas Pipeline Projects Under Construction

S.No.

Name of thePipeline

Name ofEntity

Length(Kms)

CompletionStatus

Remarks

1

Dadri-Bawana-Nangal*

GAIL (India)Limited

886

Partly-Commissioned

Authorized by Central Governmentprior to the appointed day. Maintrunk pipeline from Dadri toNangal up to Bhatinda iscommissioned. Spur -lines areunder-construction.

2

Chhainsa-

Gurgaon-Jhajjar-Hisar*

GAIL (India)Limited

455

Partly-Commissioned

Authorized by Central Governmentprior to the appointed day. Maintrunk pipelines from Chhainsa toJhajjar and Sultanpur -Neemranaare commissioned. However, theproject is currently on hold fromSultanpur-Hissar section as perinformation submitted by GAIL .

3

GSPL's HighPressure GujaratGas Grid*

Gujarat StatePetronetLimited

2239

Partly-Commissioned

Authorized by PNGRB after theappointed day under Regulation18. Approx. 1820 KM pipelinealready commissioned. Balancepipeline sections are under -execution.

4

Kochi-Koottanad-Bangalore-

Mangalore*

GAIL (India)Limited

1104

2012-13

Authorized by Central Governmentprior to the appointed day and theprojects are under -executionstage.

5

Jagdishpur-Haldia

GAIL (India)Limited

1860

2013-14**

6

Dabhol-Bangalore*

GAIL (India)Limited

1414

2012-13

7

Mallavaram-Bhopal-Bhilwara-Vijaipur

GSPL INDIATRANSCOLIMITED

2042

2014-15

Authorized by PNGRB

8

Mehsana-Bhatinda

GSPL INDIAGASNETLIMITED

2052

2014-15

9

Bhatinda-Jammu-Srinagar

GSPL INDIA

GASNETLIMITED

725

2014-15

10

Surat-Paradip

GAIL (India)Limited

2112

2015-16

TOTAL: 14889

* Projects partially commissioned

** As per the Central Government authorization, project has to be completed within 36 months from the date of thefirst 3(1) notification under PMP Act, 1962. No 3(1) notification has been done so far for this project

closed urea units of FCIL and HFCL

and proposed Greenfield units need to

be provided on priority basis.



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JOINT VENTURES ABROAD

3.6.1 Due to constraints in the availability of

Gas in the country, which is the

preferred feed stock for production of

nitrogenous fertilizers, a near total

dependence on imports for Phosphatic

fertilizer and its raw materials and full

import dependence for MOP, the

Government has been encouraging

Indian companies to establish Joint

Ventures abroad in Countries which are

rich in fertilizer resources for production

facilities with buy back arrangements

and to enter into long term agreements

for supply of fertilizers and fertilizer

inputs to India. Further, the Department

is also working with the goal of having

access to / acquisition of the fertilizer

raw materials abroad.

3.7.1 Fertilizer joint ventures have been set

up in 6 Countries in the previous years.

The details of these joint ventures in

the fertilizer sector are given below:

JOINT VENTURES PROJECTS

Sl. No. JV Project-Country JV participants with equity % Product and the project status

1. Oman IndiaFertilizer Co.

(OMIFCO), Oman

Oman Oil Co. (OOC -

50%),

IFFCO (25%) &

KRIBHCO (25%)

16.52 lakh MT Urea & 2.48

lakh MT Ammonia.

Production started in the

year 2006.

2.

ICS Senegal,

Senegal

ICS Senegal and IFFCO

consortium

5.5 lakh MT phosphoric

acid. Production already

started.

3.

Indo-JordanChemicals

Company (IJC),

Jordan

JPMC (Jordan) & SPIC(India)*

SPIC has no more in the

JV.

2.24 lakh MT phosphoricacid. Already producing.

4.

JPMC

IFFCO

JV, Jordan

JPMC & IFFCO

4.8 lakh MT phosphoric acid

to be commissioned by

2013.

5.

IMACID, Morocco

OCP (50%)

Morocco,

Chambal (25%) & TCL

(25%)-

India

4.25 lakh MT phosphoric

acid

6

Tunisia-India

Fertilizer Company

(TIFERT), Tunisia

GCT (Tunisia), CFL (Now

CIL) & GSFC (India)

3.60 lakh MT of phosphoric

acid. Commercial

production was delayed for

some political reasons.

Now, the production will start

in 2013.



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Following developments have taken

place in the year 21012-13 with regard

to cooperation in fertilizer sector in

different countries :-

3.7.2 On 28th August 2012 a Protocol has been

signed between this Department and the

Ministry of Industry & Trade of the Russian

Federation after the meeting of the Sub-Group

on Fertilizers. In the protocol, it has been

recommended that the FAI from India and the

Russian Association of Fert i l izers

Manufactures (RAFM) should regularly

exchange information and develop direction

for long-term cooperation with thecoordination of their activities with the work

plans of the Sub-Group on fertilizers. The

protocol further envisages that both

associations could also explore possible

areas of cooperation in the field of Technology

up-gradation of Indian fertilizer plants for

granulations of Urea. In the protocol the

associations were desired to summit

corresponding proposals on cooperation for

considerationofworkinggroup.

3.7.3 To follow up, of a high level industry

delegation led by Secretary(F) visited

Russia during 14-16th Jan. 2013.

During the visit an MOU has been

signed between FAI and RAFM to

enhance cooperation in fertilizer sector.

3.7.4 On 14th November 2012, during the

visit of Prime Minister of Belarus to

India, a MOU has been signed between

DOF and the Belarusian Ministry of Oil

& Chemistry for cooperation in the field

of Potash in supply of these elements

to India. According to this MOU, Indian

Russia

Belarus

entities and Belarus Potash Company

was to finalize a long-term agreement

for off-take of Potash, by 15th January

2013.

3.75 Recently a high level industry delegation

led by Secretary(F) visited Belarusduring 8th-11th January 2013 to discuss

the possibilities of joint ventures for

investment in fertilizer assets and joint

ventures in Belarus and also long term

agreement for supply of Potash.

3.7.6 A high level industry delegation led by

Secretary(F) visited Ukraine during 11th 14th January 2013. Followed this

visit, DOF has requested the Indian

Mission in Ukraine and the MEA to

pursue the Ukrainian authorities to hold

the first meeting of above mentioned

JWG at the earliest and also has

proposed following items for inclusion in

the Agenda items for the proposed

meeting.

(i) Interest of India / Indian fertilizer

entities for equity participation in

the Odessa plant of Ukraine;

(ii) Interest of India/Indian fertil izer

entities for any other existing or

new fertilizer project of Ukraine;

(iii) Interest of India for entering in to

long term agreement for supply offertilizers from Ukraine to India;

and

(iv) Possibilities of Ukrainian invest-

ment in the fertilizer sector of India

specially for revival of closed

fertilizer units in India

Ukraine



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Togo

3.7.8 Togo has good reserve of Rock Phosp-

hate, estimated to be around 130 million

tonnes. After the visit of Secretary(F) led

delegation to Togo during 10th-11th July

2012 which discussed about oppor-

tunities between the two Countries for

cooperation to develop Phosphate

Industry in Togo, considerable progress

has been made in the matter of

cooperation between the two countries

for development of phosphate fertilizer

sector of Togo. The Togolese Minister for

Mines requested for a formal proposal

from India. It was reciprocated by wayof a proposal for participation of the

Indian Fertilizer entities in mining and

production of phosphate in Togo, either

by way of acquiring equity in the existing

Togolese phosphate companies or new

companies, or by acquiring new mining

areas. Togolese authorities reciprocated

with a modified proposal. The views of

this Department were communicated to

Togo through MEA on 28.08.2012.

Response from the Togo is awaited.

3.7.9 On 12th November 2012, an MOU wassigned for cooperation in the field of

fertilizer sector.

A proposal for sett ing up of a joint

venture for production of Urea- Amonia in

Ghana is presently under consideration

of Government of Ghana. RCF, the

nominated agency for India, has forwa-rded a draft Joint Venture Agreement to

Govt. of Ghana. The response of Govt.

of Ghana ia awaited, particularly on the

issue of confirmed availability of gas and

its price. Meanwhile, RCF has initiated

preliminary work on various studies for

the project for which land has already

been identified.

Afghanistan

Ghana



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Chapter - 4

Availability & Movementof Major Fertilizers During 2012-13

4.1.1 The season/month-wise demand is

assessed and projected by the Depart-

ment of Agriculture and Cooperation

(DAC) in consultat ion with State

Governments, before commencement of

each cropping season. Accordingly,

month-wise, state-wise supply plan is

made and monitored upto State level by

the Department of Fertil izers. Theconcerned State Governments are

responsible for monitoring the availability

intra-state.

4.2.1 The availability of urea, which is the

only fertilizer under price and partial

movement control of Government,

remained satisfactory throughout theseasons of Kharif 2012 and the current

Rabi 2012-13 (up to January, 2013).

4.2.2 The requirement of Urea for Kharif

2012, as assessed by DAC was 150.82

LMT i.e. an increase of 8.3% over the

sales of 139.21 LMT in Kharif 2011.

The opening stock, taking into accountprepositioned stock was 15.29 LMT (as

on 01.04.2012). Indigenous production

of 108.71 LMT and Imports of 27.52

LMT helped in ensuring adequate

availability in all the states, throughout

the season. The cumulative availability

of urea with the states for the season,

CONTROLLED FERTILIZER (UREA)

Kharif 2012

was nearly 153.47 LMT (taking into

account pre-positioned of stock),against

the assessed requirement of 150.83

LMT. The sales were only135.79LMT

during Kharif 2012.

4.2.3 The requirement of urea for Rabi 2012-

13, as assessed by DAC, was 164.60

LMT i.e. an increase of 6.12% over the

sales of 155.10 LMT in Rabi 2011-12.

The requirement is being met from the

opening stock of 6.29 LMT, with

estimated production of 117.71 LMT

and imports of about 53.01 LMT during

the season. Thus the cumulat ive

availability of urea for Rabi 2012-13 has

been estimated to be about 177.01

LMT by the end of 31st March, 2013,

which will be sufficient to meet the

requirement. The sales are 138.95 LMT

(upto February'13).

4.3.1 DAP, NPK and MOP are the majordecontrolled and decanalised fertilizers,

which may be imported freely.

4.3.2 In case of fertilizers, which are decon-

trolled, no allocation is made under

Essential Commodities Act (ECA) by the

Central Government.

Rabi 2012-13

Kharif 2012

DECONTROLLED FERTILIZERS (DAP, NPK

& MOP)



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4.3.3 DAP : The opening stock of 4.39 LMT

(as on 1st April, 2012), coupled with

indigenous production of 16.64 LMT

and Imports of 43.46 LMT, resulted in

adequate availability of about 64.09

L M T , a s a g a i n s t t h e a s s e s s e d

requirement of 69.40 LMT for Kharif

2012 season. The sales of DAP in

Kharif 2012 were only 40.78 LMT.

4.3.4 MOP: The opening stock of 4.71LMT

(as on 1st April, 2012), coupled with

Imports of 17.20 LMT resulted in

availability of about 21.81 LMT, as

against the assessed requirement of

21.97 LMT for Kharif 2012. The sales

of MOP were only10.84LMT.

4.3.5 NPK : The opening stock of 10.83 LMT

(as on 01/04/2012) ,coup led wi th

indigenous production of 32.18 LMT and

Imports of 3.08 LMT, resulted in

adequate availability of about 46.09LMT,

as against the assessed requirement of

55.53 LMT for Kharif 2012. The sales of

NPK in Kharif 2012 were only38.84 LMT.

4.3.6 DAP : The opening stock of 23.71 LMT

(as on 01.10.2012), coupled with

estimated production of 19.39 LMT and

estimated imports of 13.37 LMT, makes

total availability of 56.40 LMT, as

Rabi 2012-13

against then assessed requirement

54.18 LMT for Rabi 2012-13 which is

sufficient to meet the requirement. The

Sales are only 43.04 LMT (upto

February'13).

4.3.7 NPK : The opening stock of 7.25LMT(as on 01.10.2012) coupled with

estimated production of NPK of about

45.02 LMT and estimated imports of

1.46 LMT, makes total availability of

53.73 LMT, as against the assessed

requirement of 55.99 LMT for Rabi

2012-13, which will be sufficient to meet

the requirement. The sales are only

26.33 LMT (upto February'13).

4.3.8 MOP : The opening stock of MOP was

10.97 LMT (as on 01.10.2012), coupled

with estimated imports of 6.92 LMT,

makes total availability of 17.89 LMT,

as against the requirement of 25.84

LMT for Rabi 2012-13, which will be

sufficient to meet the requirement. The

s a l es a re on l y 8 . 55 LM T (up t o

February'13).

4.4.1 Following table summarizes the season-

wise position of Demand/Availability and

Sales of the major fertilizers, i.e. Urea,

DAP, NPK & MOP, for the last three

seasons:

SEASON WISE SUMMARY

Crop seasonDemand

Assessment

CumulativeAvailability

CumulativeSales

% age of

availability toassessed

demand1 2 3 4 5

Kharif 2011

Urea

DAP

NPKMOP

142.16

71.38

52.0622.54

146.23

60.80

59.3410.73

139.21

48.71

53.957.00

102.86

85.17

113.9847.60



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Crop SeasonDemand

Assessment

Cumulative

Availability

Cumulative

Sales

% age of

availability to

assessed

demand

1 2 3 4 5

Rabi 2011-12Urea

DAP

NPK

MOP

162.99

54.78

55.30

25.72

158.98

67.15

59.97

24.62

155.10

63.13

59.60

22.90

97.53

122.58

126.52

95.72

Kharif 2012

Urea

DAP

NPK

MOP

150.82

69.40

55.53

21.97

142.06

64.09

46.09

21.81

135.77

40.78

38.84

10.84

94.19

93.34

83.00

99.27

RAIL MOVEMENT

4.5.1 The major share in transportation of

fertilizers is of the Railways. During

2011-12, Railways moved more than

75% of the fertilizers.



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5.1.1 The installed capacity and production of

fertilizers in the country at the end ofninth five year plan, in the terminal

year of the tenth five year plan and at

the eleventh five year plan ( 2011-12)are indicated below:

Sr.

No

Particulars At the end of

Ninth Plan (

2001-02).

At the end of Tenth

Plan ( 2006-07).

At the end of

Eleventh Five ye ar

plan (2011-12)

1 Capacity

i ) Nitrogen

ii) Phosphates

120.58

53.87

120.61

56.59

120.61

56.59

2 Production

i ) Nitrogen

ii) Phosphates

107.68

38.60

115.78

45.17

122.59

41.04

5.1. 2 The installed capacity of nitrogen and

phosphate in the terminal year (2001-

02) of the ninth plan was 120.58 lakh

MT and 53.87 lakh MT, respectively.

Three major phosphatic fertilizer plants

were commissioned during the ninth

five year plan period, namely, Oswal

Chemicals & Fertilizers Ltd.-Paradeep, (

since taken over by IFFCO), Indo-Gulf

Corporation-Dahej and Gujarat State

Fert i l izers Company Ltd.-Sikka-I I .

Consequent upon reassessment of urea

capacity on the basis of Dr. Y.K. Alagh

Committee and DAP capacity by Tariff

Commission, despite phasing out of 10

urea units due to closure.

5.1.3 Year-wise consumption, production and

imports of fertilizers in nutrients terms

are given in Annexure-V.

5.1.4 The production of fertilizers in nutrient

terms during 2011-12 was 122.59 lakh

MT of nitrogen and 41.04 lakh MT of

phosphate. The estimated production for

2012-13 is 123.99 lakh MT of nitrogen

and 38.76 lakh MT of phosphate.

Sector-wise targets and achievements

in respect of production and capacity

utilization from 2004-05 onwards are

given in Annexure-VI & VII.

INSTALLED CAPACITY AND PRODUCTON OF NITROGENOUS AND

PHOSPHATIC FERTILIZERS IN NINTH, TENTH AND ELEVENTH FIVE YEAR PLANS (In lakh MT)

Chapter - 5

Plan Performance



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PLAN OUTLAYS

5.2.1 The Plan outlay for 2012-13 was approved by

the Planning Commission. The total outlay is

Rs.3331.29 crores out of which an amount of

Rs.3075.29 crores will be from profit making

companies in the shape of Internal & Extra

Budgetary Resources(IEBR)and the balance

amount of Rs.256.00 crore will be provided to

loss making entities by way of Gross

Budgetary Support (GBS) from the

Government. The outlay is for Rashtriya

Chemicals & Fertilizers Limited (RCF)

Rs.673.75 crores, FCI Aravali Gypsum

Minerals India Ltd. (FAGMIL) Rs.23.51

crores, Project & Development India Limited

(PDIL) Rs.6.05 crores, National Fertilizers

Limited (NFL), Rs.1696.98 crores, Krishak

Bharati Cooperative Ltd. (KRIBHCO)

Rs.675.00 crores, Brahmaputra Valley

Fertilizers Corporation Ltd. (BVFCL)

Rs.94.62 crores, Fertilizers and Chemicals

Travancore Ltd. (FACT) Rs.61.75 crores,

Madras Fertilizers Limited (MFL) Rs.87.62

crores.

5.2.2 Out of the Gross Budgetary Support

provided by the Government, bulk of

allocation was made to three loss

making PSUs, namely BVFCL, FACT

and MFL for meeting their urgent

capital expenditure requirement. Under

Miscellaneous Scheme, a small amount

of Rs.8.5 crore has been earmarked in

the Department for Management of

Information Technology(MIT) and Rs.3.5

crore under Research & Development

programme. Department of Fertilizers is

exploring the possibilit ies of Joint

Ventures abroad. Since there is no firm

proposal in hand right now, only a

token amount of Rs.0.01 crore has

been kept.

5.2.3 For the year 2012-13, there was net

Budgetary Provision (BE) of Rs 61,256

crore. Out of which Rs 256 crore was

under Plan and Rs 61000 crore was

under Non-P lan. In the Rev ised

Estimates (RE) for 2012-13, the net

provision is Rs 66010 crore out of

which Rs10 crore under Plan and Rs

66000 crore under Non-Plan. The

details of Plan and Non-Plan provisions

in BE and RE for FY 20112-13 are

given in Annexure-VIII.



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6.1.1 For sustained agricultural growth and to

promote balanced nutrient application, itis imperative that fertilizers are made

available to farmers at affordable prices.

With this objective, urea being the only

controlled fertilizer, is sold at statutorily

notified uniform sale price, and decon-

trolled phosphatic and potassic fertilizers

are sold at maximum retail prices

(MRPs). The problems faced by the

manufacturers in earning a reasonable

return on their investment with referenceto controlled prices, are mitigated by

providing support under the New Pricing

S c hem e f o r u rea un i t s and t he

Concession Scheme for decontrolled

phosphatic and potassic fertilizers. The

statutori ly notif ied sale price and

indicative MRP is generally less than

the cost of production of the respective

manufacturing unit. The difference

between the cost of production and the

selling price/MRP is paid as subsidy/

concession to manufacturers. The

consumer prices of both indigenous and

imported fertilizers are generally same.

Financial support is given on imported

urea and decontrolled phosphatic and

potassic fertilizers.

6.2.1 Until 31.3.2003, the subsidy to urea

manufacturers was being regulated in

terms of the provisions of the erstwhile

Retention Price Scheme (RPS). Under

RPS, the difference between retention

price (cost of production as assessed

by the Government plus 12% post tax

MEASURES OF SUPPORT FOR UREA

return on net worth) and the statutorily

notified sale price was paid as subsidyto each urea unit. Retention price

used to be determined unit wise, which

differed from unit to unit, depending

upon the technology, feedstock used,

the level of capacity utilization, energy

consumption, distance from the source

of feedstock/raw materials, etc. Though

the RPS did achieve its objective of

increasing investment in the fertilizer

industry, and thereby creating newcapacit ies and enhanced fert i l izer

production along with increasing use of

chemical fertilizers, the scheme had

been criticized for being cost plus in

nature and not providing incentives for

encouraging efficiency.

6.2.2 Given the importance of fertilizer pricing

and subsidization in the overall policy

e n v i r o n m e n t , w h i c h h a s d i r e c timplications with reference to the growth

and development of agriculture and

sustainability of the fertilizer industry, the

need for streamlining the subsidy

scheme in respect of urea producing

units had been felt for a long time. A

High Powered Fertilizer Pricing Policy

R e v i e w C o m m i t t e e ( H P C ) w a s

constituted, under the chairmanship

of Prof. C.H. Hanumantha Rao, toreview the existing system of subsi-

dization of urea, suggest an alternative

broad-based, scientific and transparent

methodology, and recommend measures

for greater cohesiveness in the policies

applicable to different segments of the

industry. The HPC, in its report subm-

Chapter - 6

Measures of Support for Fertilizers



29/176

itted to the Government on 3rdApril

1998, inter-alia, recommended that unit-

wise RPS for urea may be discontinued

and, instead, a uniform Normative

Referral Price be fixed for existing gas

based urea units and also for DAP anda Feedstock Differential Cost Reimbu-

rsement (FDCR) be given for a period

of five years for non-gas based urea

units.

6.2.3 The Expenditure Reforms Commission

(ERC), headed by Shri K.P. Geetha-

krishnan, had also examined the issue of

rationalizing fertilizer subsidies. In its

report submitted on 20th September2000, the ERC recommended, inter-alia,

dismantling of existing RPS and in its

place, introduction of a Concession

Scheme for urea units based on

feedstock used and the vintage of plants.

6.2.4 The recommendations of ERC were

examined in consultation with the

concerned Ministries/Departments. The

views of the fertilizer industry and theState Governments/Union territories,

and economists/research institutes were

also obtained. After due examination of

all these views, a New Pricing Scheme

(NPS) for urea units for replacing the

RPS was formulated and notified on

30.1.2003. The new scheme took effect

from 1.4.2003. It aimed at inducing the

urea units to achieve internationally

competitive levels of efficiency, besidesbringing in greater transparency and

simplification in subsidy administration.

6.2.5 New Pricing Scheme (NPS) for urea

was introduced w.e.f. 1st April, 2003.

The Stage-I of NPS was of one year

duration from 1st April, 2003 to 31st

March, 2004 and Stage-II was of two

year duration from 1st April,2004 to

31st March, 2006. With the Stage-III of

NPS being implemented w.e.f. 1st

October, 2006, the Stage-II of NPS was

extended upto 30th September, 2006.

6.2.6. Under NPS, the existing urea units have

been divided into six groups based on

vintage and feedstock for determining

the group based concession. These

groups are : Pre-1992 gas based units,

post-1992 gas based units, pre-1992

naphtha based units, post-1992 naphtha

based units, fuel oil/low sulphur heavy

stock (FO/LSHS) based units and mixedenergy based units. The mixed energy

based group shall include such gas

based uni ts that use al ternat ive

feedstock/fuel to the extent of more than

25% as admissible on 1.4.2002.

6.2.7. Under NPS, escalation/de-escalation is

given in respect of variable cost related

to changes in the price of feedstock,

fuel, purchased power and water. Underthe scheme, neither any reimbursement

is allowed in respect of investment

made by a unit for improvement in its

operations nor are the gains as a result

of operational efficiencies are mopped

up.

6.2.8. It has also been provided under the

scheme that the concession rates

during Stage-II shall be adjusted forreduction in capital related charges and

enforcement of efficient energy norms.

Pre-set energy norms for urea units

during Stage-II of NPS have already

been notified and intimated to urea

units. Reduction in rates of concession

during Stage-II of NPS for urea units on



30/176

account of reduction in capital related

charges have also been notified and

intimated to urea units.

6.3.1. As per the New Pricing Scheme for urea

units, i t was also envisaged that

decontrol of urea distribution/movement

will be carried out in a phased manner.

During Stage-I, i.e. from 1.4.2003 to

31.3.2004, the allocation of urea under

the Essential Commodities Act 1955

(ECA) was restricted up to 75% and 50%

of installed capacity (as reass-essed) ofeach unit in Kharif 2003 and Rabi 2003-

04, respectively. It was further envisaged

that during Stage-II commencing from

1.4.2004, urea distribution will be totally

decontrolled after evaluation of Stage-I

with the concurrence of the Ministry of

Agriculture.

6.3.2. The total decontrol of urea distribution

was deferred initially for a period of sixmonths w.e.f. 1.4.2004 i.e., up to end of

Kharif 2004, which was subsequently

deferred up to Rabi 2005-06 i.e. up to

31.3.2006. The existing system of 50%

ECA allocation and 50% outside ECA

allocation has been extended upto 31-

3-2010.

6.3.3. The pricing policy for urea units for

Stage-III of New Pricing Scheme (NPS)which is effective from 1.10.2006 has

been formulated keeping in view the

recommendations of the Working Group

set up under the Chairmanship of

Dr. Y.K. Alagh. The Policy aimed at

promoting further investment in the urea

sector, to maximize urea production

PHASED DECONTROL OF UREA

DISTRIBUTION

from the urea units including through

conversion of non-gas based units to

gas, incent iv is ing addit ional urea

production and encourage investment in

Joint Venture (JV) projects abroad. It is

also aimed at establishing a moreefficient urea distribution and movement

system in order to ensure availability of

urea in the remotest corners of the

country.

6.3.4. The Stage-III policy seeks to promote

usage of most efficient and compa-

ratively cheaper feed stock natural

gas/LNG for production of urea in the

country. The policy lays down a definiteplan for conversion of all non-gas

based urea units to gas. At present,

there are 8 urea units (MFL, SPIC, ZIL,

MCFL, GNFC, NFL-Nangal , NFL-

Bhatinda, NFL-Panipat) in the country

which are based on naphtha or

FO/LSHS as feed stock. All these 8

units are required to switch over to

natural gas/LNG within a period of next

three years. Beyond this time limit, thehigh cost urea produced by these non-

gas based units will not be entitled to

subsidy at the existing levels and it will

be restricted to import parity price of

urea. The units, which are unable to tie

up gas will have to explore alternative

feed stocks like Coal Bed Methane

(CBM) and coal gas. Shriram Fertilizers

and Chemicals Ltd has started using

gas w.e.f. 22.9.2007.

6.3.5. The availability of gas is critical to the

growth of urea industry in the country.

Presently, the indigenous availability is

not sufficient to meet the demand of

existing gas based urea units in the

country. To this end, the Department of



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Fertilizers constituted a Committee

under the chairmanship of Secretary

(P&NG) with Secretary (Fertilizers),

Secretary (Expenditure), Secretary

(Planning Commission) as its members

to deliberate upon various issuesrelating to connectivity and assured

supply of gas to the fertilizer sector.

The Committee was also to develop an

appropriate mechanism for fixing the

price of the gas in a transparent

manner. It was expected then that the

availability of gas in the country will

improve from 2008-09 onwards and the

new policy, taking into account the

above fact, has laid down specifictimelines for conversion of all non-gas

based units in the country to gas.

6.3.6. In order to incentivise conversion of

non gas based units to gas, the policy

provided for a regime where there

would be no mopping up of energy

efficiency for a fixed period of five

years for naphtha based as well as

FO/LSHS based units. The policy alsorecognized the comparative higher cost

of conversion of FO/LSHS based units

to gas and provides for one time capital

investment assistance to these units for

conversion to gas during the next three

years. A specific policy to this effect

has been announced by the Govern-

ment on 6th March 2009.

6.3.7. The policy also lays down a formulationto dis-incentivise high cost production

from the non-gas based units and to

facilitate their early conversion to gas.

It is proposed that these units may be

allowed to produce 100% of capacity

should they adhere to an agreed

timetable for conversion to Gas and tie

up requisite Gas/CBM/Coal gas. If they

do not, they will be given only 75% of

the fixed costs beyond 93% of capacity

utilization in the 1st year (1.4.2007) and

50% of the fixed cost beyond 93%

capacity uti l ization from 2nd year(1.4.2008) onwards.

6.3.8. Consider ing the l ikely growth in

consumption of urea in the years to

come, the policy seeks to encourage the

existing urea units to produce beyond

100% of their installed capacities by

introducing a system of incentives for

additional urea production subject to merit

order procurement. The policy ofrequiring prior Government permission for

additional urea production has been

dispensed with. All production between

100% and 110% of the existing reass-

essed capacity will be incentivised on the

existing net gain sharing formula between

the Government and the unit in the ratio

of 65:35 respectively with the proviso that

the total amount paid to the units after

including the component of variable costwi l l be capped at the units own

concession rate. The units increasing

product ion beyond 110% wi l l be

compensated at their concession rate

subject to the over all cap of Import Parity

Price (IPP). To the extent Government

does not require any quantities of

additional production, the urea companies

would be free to dispose of the remaining

quantities by way of export or sale tocomplex manufacturers without any

permission. The policy also encourages

setting up of Joint Venture projects

abroad where gas is readily available at

reasonable prices. It recognizes our

heavy dependence on imported raw

materials/ intermediates and feedstock in



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the fertilizer sector and to properly

leverage this position, the policy seeks to

create specialized agency to coordinate

investments abroad in fertilizer sector.

6.3.9. The policy seeks to rationalize distri-bution and movement of urea and the

system of freight reimbursement with

the objective of ensuring availability of

urea in all parts of the country. The

Government will continue to regulate

movement of urea up to 50% of

production depending upon the exigency

of the situation. The State Governments

will be required to allocate the entire

quantity of planned urea arrivals inclu-ding both regulated and de-regulated

urea in district-wise, month-wise and

supplier-wise format. The units will be

required to maintain a district level stock

point and the subsidy will be paid only

when the urea reaches the district. The

monitoring of movement and distribution

of urea throughout the country up to the

district level will be done by an On line

Web based monitoring system. Tofacilitate movement of fertilizers to far

flung area, the reimbursement of freight

will be based on actual leads for rail and

road movement. The rail freight will be

reimbursed as per the actual expenditure

and the road freight will be escalated as

per composite road transport index every

year. One time enhancement of 33% will

be granted on the road component of

primary freight to offset the impact ofSupreme Court directive regarding

maximum truck load limit of 9 MT on

road vehicles. The existing special freight

subsidy scheme will continue for supply

of urea to the North Eastern States

except Assam and Jammu & Kashmir. In

addition, the Department will operate a

buffer stock through the state institutional

agencies/ fertilizer companies in major

urea consuming States up to a limit of

5% of the seasonal requirement.

6.3.10.The Stage-III of NPS seeks to carry onthe existing 6 group classification of

urea manufacturing units in the country

with updation of all costs upto 31st

March, 2003. The respective pre-set

energy consumption norm of each urea

units during Stage-II of NPS or the

actual energy consumption achieved

during the year 2003, whichever is

lower, will be recognized as the norm

for Stage-III of NPS. The policy alsoprovides for updation of costs on

account of cost of bags through 3 year

moving weighted average cost of bags

to compensate for the rise in prices for

the last three years. It also provides for

payment of sales tax on input and other

taxes recognized under erstwhi le

Retention Price Scheme, on actual

basis.

6.3.11. NPS Stage-III seeks to take forward the

principles of uniformity and efficiency in

urea production as enunciated during

Stage I and II of NPS and also aims at

bringing in more transparency in

distribution of fertilizers across the

country. It is expected that the policy

will encourage increase in indigenous

production from the existing urea units

in the country and facilitate earlyconversion of non-gas based units to

gas leading to substantial savings in

subsidy. With the launch of Fertilizer

Monitoring System (FMS) to monitor

movement of fertilizers upto district level

and the freight rationalization proposed

in the new policy, the distribution of



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fertilizers in remote corners of the

country wil l improve considerably

without any complaints of shortages in

future. The Department of Fertilizers will

continue its endeavour to promote the

growth of fertil izer industry in thecountry and ensure adequate availability

of fertilizers to the farmers.

6.4.1. The Stage-III of New Pricing Scheme

(NPS) is being implemented w.e.f. 1st

October, 2006. In the Policy proposal

approved by CCEA, it was mentionedt h a t s o m e u r e a u n i t s s u c h a s

Nagarjuna Fertilizers & Chemicals Ltd.

(NFCL), Kakinada, Southern Petro-

chemicals Industries Corporation Ltd.

(SPIC), Tuticorin etc. has represented

that the implementation of group based

NPS in place of unit specific cost plus

Retention Price Scheme (RPS) has

resulted in certain under recoveries of

their individual costs of production. Itwas proposed to take appropriate action

in these cases on merits in consultation

with Department of Expenditure (DoE).

6.4.2. Accordingly, after notification of NPS-III

on 8th March, 2007, a number of units

have represented to Department of

Fertilizers indicating the under recoveries

on account of various provisions of the

group based NPS. The issues raised bythe units have been examined within the

Department and these can be divided

into two categories. The first issue relates

to losses due to group averaging, and

the second issue relates to increase

in capacity utilization norms for NPS

Stage-III.

AMENDMENTS TO STAGE III OF NEW

PRICING SCHEME (NPS).

6.4.3. It was found that some of the companies

are losing upto 85% of their fixed cost

due to the group averaging principle

followed under NPS-III, making their

operations unsustainable from day one.

Thus, there was a need to limit thereduction due to averaging procedure for

various units so as to ensure sustain-

ability of production while encouraging

efficiency. It has been, therefore, decided

to restrict the reduction in fixed costs of a

unit due to group averaging under NPS-

III to 10% of the total fixed cost of the

unit, w.e.f 1st April 2009 onwards.

6.4.3. It was also found that for all thecompanies the capacity util isation

norms have been increased by 3%

from NPS-II stage to NPS-III. However,

for post-92 Naphtha based group it has

been increased by 8% on the pretext

that the units have converted to gas.

But since the cost of conversion is not

borne by GOI, an indiscr iminate

increase by 8% for this group has put

the un i ts under th is group a t adisadvantage. It was thus decided to

take capacity utilisation for post 1992

naphtha group at 95%, instead of

earlier approved 98% under NPS-III, for

calculation of notional retention price

of the units within the group, if there

has been no recognition of cost of

conversion under NPS-III.

6.5.1. The tenure NPS Stage-III policy ended

on 31st March 2010. The provisions of

the NPS-III policy has since been

extended provisionally till further order.

Now the policy beyond NPS-III is under

consideration of Government. The Group

UREA POLICY BEYOND NPS-III



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of Ministers (GoM) constituted to review

the fertilizer policy has decided in its

meeting held on 5th January 2011 to

constitute a Committee under the Chair-

manship of Dr. Saumitra Chaudhuri,

Member Planning Commission toexamine the proposal for introduction of

NBS in urea, including various options

therefore, and make suitable recommen-

dations. The committee has also to exa-

mine the issues relating to investment

policy and amendments proposed

therein, and make appropriate recom-

mendations.

6.5.2 The Committee constituted under theChairmanship of Dr. Saumitra Chaudhuri,

Member Planning Commission has

submitted its report on 26-04-2011 on the

proposal for Nutrient Based Subsidy in

Urea sector. The Group of Ministers,

considered the report of the Committee

of Secretary in its meeting held on 5th

August 2011 and di rected that the

proposal on Nutrient Based Subsidy

(NBS) for Urea may be placed beforeCCEA along with the proposal of

Department of Fertilizers and the views

of Minister of Chemicals & Fertilizers and

sought directions of CCEA. As per the

directions of Cabinet Secretariat, the

Department of Fertilizers has consulted

concerned Ministries/Departments and

revised the CCEA Note on formulation of

policy for existing urea units beyond

Stage-III of NPS The proposal forformulation of policy for existing urea

units beyond Stage-III of New Pricing

Scheme for existing urea units was

forwarded to Cabinet Secretariat on 23-

11-2012 for consideration of CCEA. The

Prime Minister's office examined the

CCEA note dated 23-11-2012 and

requested Department of Fertilizers to

re f e r t he p ropos a l t o G roup o f

Ministers(GOM) as decided earlier by the

CCEA in its meeting of CCEA held on

1 4 - 0 6 - 2 0 1 2 . C o n s e q u e n t l y , t h e

Department of Fertilizers requestedCabinet Secretariat to constitute the

Group of Ministers so that the proposal

for formulation of policy for existing units

beyond Stage-III of New Pricing Scheme

is placed for consideration of the GoM.

The Cabinet Secretariat has constituted

the GoM with the approval of Prime

Minister consist ing of Minister of

Agriculture and Minister of Food Proce-

ssing Industries, Minister of Finance,Minister of Petroleum & Natural Gas,

Minister of Chemicals & Fertilizers,

Minister of Rural & Development, Deputy

Chairman of Planning Commission and

Minister of State (Independent Charge),

Ministry of Consumer Affairs, Food and

Public Distribution to look into all aspects

relating to formulation of policy for the

existing urea units beyond Stage-III of

New Pricing Scheme. The meeting ofGoM ,scheduled to be held on 20th

February 2013, was postponed. Agenda

note regarding formulation of policy for

existing units beyond Stage-III of New

Pricing Scheme entirely based on the

proposal submitted to CCEA on 23rd

November 2012 has been circulated.

6.6.1. The MRP of urea since 2003 was Rs.

4830/- per tonne. The MRP of urea

was increased to Rs. 5310/- per tonne

w.e.f. 1st April 2010. The MRP fixed is

exclusive of CST, Sales Tax and

Central Excise Duty. With effect from

01st November 2012, the urea is be

MRP OF UREA



35/176

sold at Maximum price of Rs. 5360 per

tonne (exclusive of the central excise

duty, central sales tax, countervailing

duty, the state tax and other local taxes

wherever levied, whether at the retail

sales point or at an intermediatestages. The retailer margin is increased

by Rs. 50 PMT, which will be paid to

retailers acknowledging the receipt of

work and reporting the stock through

mFMS as additional incentive in the

retailer margin.

6.7.1 A pricing policy was announced on

29.1.2004 for setting up new urea

projects and expansion of existing urea

projects for augmenting the domestic

production capacity of urea to meet the

growing demand for enhancing the

agricultural production in the country.

The new policy aimed at enabling the

entrepreneurs to decide about their

investment plans in the fertilizer sector.

The new pol icy was expected to

encourage setting up of plants with

international efficiency standards for

fresh investment in new projects and

expansion of existing units. The policy

was based on the principle of Long

Run Average Cost (LRAC).

6.7.2 The above policy was not successful in

attracting investment in this sector. The

non-availability of natural gas, which is

the critical feedstock for production of

urea, has also been one of the major

constraints in further addit ion of

indigenous capacity for production of

PRICING POLICY FOR INVESTMENT IN

FERTILIZER SECTOR

Urea

urea. However with the projected

improved availability of gas from 2009

onwards, it is expected that investment

in fertilizer sector will also take place.

The Government had announced on 4th

September 2008, a new investmentpolicy for urea sector to attract the

much required investment in this sector.

The policy was based on IPP bench-

mark and had been f ina l i zed in

consultation with the industry.

6.7.3 The policy is expected to lead to

savings to the Government in the form

of availability of Urea at a price below

IPP and will also lead to indirectsavings by bringing down the import

price due to reduction in imports. The

New Investment Pol icy a imed at

revamp, expansion, revival of existing

urea units and setting up of Greenfield/

Brownfield projects. The policy was

likely to substantially bridge the gap in

next five years between the consu-

mption and domestic production subject

to confirmed and adequate availabilityof gas at reasonable prices. The

salient features of the new investment

policy are as under :-

(i) The policy is based on Import

Parity Price (IPP) benchmarked

with suitable floor and ceiling

prices of USD 250/MT and USD

425/MT respectively.

(ii) Any improve-

ment in capacity of existing plants

through investment upto Rs. 1000

crore, in the existing train of

ammonia-urea production will be

treated as revamp of existing

units. The additional urea from the

Revamp project:



36/176

revamp of existing units will be

recognized at 85% of IPP with the

floor and ceiling price as indicated

above.

(iii) Expansion projects: Setting upof a new ammonia-urea plant (a

separate new ammonia-urea train)

in the premises of the existing

fertilizer plants, utilizing some of

the common utilities will qualify for

being treated as expansion project.

The investment should exceed a

minimum limit of Rs. 3000 crore.

The urea from the expansion of

existing units will be recognized at90% of IPP, with the floor and

ceiling price as indicated above.

(iv) Revival/Brownfield projects: The

urea from the revived units of

Hindustan Fertilizer Corporation

Limited(HFCL) and Fertilizer Cor-

poration of India Limited (FCIL) will

be recognized at 95% of IPP with

prescribed floor & ceiling price, ifthe revival of closed units takes

placed in public sector.

(v) Greenfield projects: The pricing

of Greenfield projects wil l be

dec ided based on a bidding

process which wi l l be for a

discount over IPP, after firming up

of the location (States) of the

proposed new plants.

(vi) Gas transportation charges: An

additional gas transportation cost

will be paid to units undertaking

expansion and revival on the basis

of actuals (upto 5.2 Gcal per MT

of urea) as decided by the Regu-

lator (Gas) subject to a maximum

ceiling of USD 25 per MT of urea.

(vii) Allocation of Gas: Only non-APM

gas will be considered for the new

investment in urea sector.

(viii) Coal gasification based Urea

Projects: The Coal gasification

based urea projects will also be

treated on par with a revival or a

Greenfield project as the case may

be. In addition, any other incen-

tives or tax benefits as provided by

Government for encouraging coal

gasification technology will also be

extended to these projects.

(ix) Joint Ventures abroad: The Joint

Venture projects abroad in gas rich

countries are also proposed to be

encouraged through firm off-take

contracts with pricing decided on

the basis of prevailing market

conditions and in mutual consu-

l tat ion with the joint venture

company. However, the principle

for deciding upon the maximum

price will be the price achieved

under Greenfield projects or 95%

of IPP as proposed for revival

pro jec ts ( in absence o f any

Greenfield projects) with a cap of

USD 405 CIF India per MT and a

floor of USD 225 CIF India per MT

(inclusive of handling and bagging

costs)

(x) Time period for proposed inves-

tment policy: Only those revamp

projects which start production of

additional capacities within four

years of notification of the new

policy would qualify for the dispen-

sation recommended above. Simi-



37/176

larly production from expansion

and revival (Brownfield) units that

come about within five years of

notification of the new policy would

qualify for dispensation provided

in the policy. If the productiondoes not come through within the

s t ipu la ted t ime per iod, such

Brownfield projects will be treated

similar to a Greenfield projects

wherein price will be decided

through limited bidding options.

The time period for setting up of

new Joint Ventures would also be

five years under the new invest-

ment policy.

6.8.1. The urea manufacturing units have

expressed concern regarding pricing

and firm availability of gas before taking

final investment decision in terms of

New Investment Policy 2008. Keeping

in view the concern of industry, theDepartment of Fertilizers decided to

amend the New Investment Policy

2008.

6.8.2. The Group of Ministers (GoM) consti-

tuted to review the fertilizer policy has

decided in its meeting held on 5th

January 2011 to constitute a Committee

under the Chairmanship of Dr. Saumitra

Chaudhary, Member Planning Commi-ssion to examine the proposal for

introduction of NBS in urea, including

various options therefore, and make

su i tab le recommendat ions . The

committee has also to examine the

issues relating to investment policy and

amendments proposed therein, and

CONCERNS OF INDUSTRY ON NEW

INVESTMENT POLICY 2008

make appropriate recommendations.

The report of the Commit tee on

Investment Policy in Urea sector has

been f inalised and signed on 7th

January 2012.

6.8.3. Keeping in view the recommendations

made in the report submitted by the Dr.

Saumitra Chaudhary committee, the

Department of Fertilizers has issued the

New Investment Policy 2012 on 02nd

January 2013.

6.9.1 The Government has recently announced

a New Investment Policy 2012 in order

to facilitate the fresh investment in Urea

sector on 2nd January, 2013. The New

Investment Policy 2012 provides a

structure of a floor price and a ceiling

price for the amount payable to Urea

units, which will be calculated based on

the delivered gas price (inclusive of

charges & taxes) to respective urea

units. The floor and ceiling price of

each urea unit shall be operative with

respect to the computed Import Parity

Price(IPP) (Annexure-IX). The IPP

definition for urea, under the investment

policy of 2008, is the average C&F

price without any applicable custom

dut ies and handl ing and bagging

charges at the port. If the computed

IPP (payable) is between the floor and

the ceiling price for that gas cost, it isthe IPP (payable) which will be used. If

the IPP (payable) is above or below the

ceiling or the floor respectively, it is the

ceil ing or f loor price that wil l be

acceptable as the case may be.

T

NEW INVESTMENT POLICY 2012 (NIP-2012)

6.9.2 he criteria according to which plants



38/176

will qualify under different categories

namely Revamp, Expansion, Revival

and Greenfield shall be as under:

(i) Revamp projects: Any improve-

ment or incremental increase incapacity of existing plants by way

of cap i ta l inves tment in the

existing train of ammonia-urea

production wil l be treated as

revamp of existing units.

(ii) Expansion or Brownfield projects :

Setting up of a new ammonia-urea plant

(a separate new ammonia-urea train) in

the premises of the existing fertilizerplants, utilizing some of the common

utilities will qualify for being treated as an

expansion project. The investment

should exceed a minimum limit of

Rs.3000crore.

(iii) Revival of closed urea units:The

three closed urea units of Hindu-

stan Fertilizer Corporation Ltd.

(HFCL) at Barauni, Durgapur and

Haldia, and five closed urea units of

Fertilizer Corporation of India Ltd.

(FCIL) at Sindri, Talcher, Ramag-

undam, Gorakhpur and Korba being

proposed for revival shall fall under

'Revival of closed urea units'.

(iv) Greenfield Projects:Any urea

unit which shall be set-up at the

project site where no previous

similar manufacturing facilit ies

existed i.e. acquisition of land

followed by construction of an

ammonia-urea plant with storage

facilities, transportation facilities,

water and sewage treatment etc.

shall be treated as a Greenfield

project.

6.9.3

6.9.4

Greenfield / Revival of Closed HFCL

& FCIL Projects

Substantial Expansion or Brownfield

Projects

(i) At a delivered gas price of upto

USD 6.5 per mmbtu for Greenfield/

Revival Urea units

(a) the Floor price is fixed at

USD 305 per MT of Urea

(b) the Ceiling price is fixed at


(ii) For each 0.1 USD per mmbtu

revision in delivered gas price, it

will correspondingly change the

(a) Floor and Ceil ing price by

US D 2 pe r M T up t o a

delivered gas price of USD 14

per mmbtu.

(b) Floor by USD 2 per MT for

delivered gas price exceeding

USD 14 per mmbtu.

` (iii) The urea from Greenfield/Revivalof closed urea units of HFCL and

FCIL units will be recognized at a

uniform rate of 95% of IPP (C&F)

subject to floating floor and ceiling

prices mentioned at 3 (i) and 3 (ii)

above.


USD 6.5 per mmbtu for Expansion

/ Brownfield Urea units

(a) the Floor price is fixed at USD

285 per MT of Urea




39/176






U S D 2 p e r M T u p t o a


per mmbtu.

(b) Floor by USD 2 per MT for


USD 14 per mmbtu

(iii) T he u rea f r om Ex pans i on /Brownfield Urea units wil l be

recognized at a uniform rate of

90% of IPP (C&F) subject to

floating floor and ceiling prices

mentioned at 4 (i) and 4 (i i)

above.

6.9.5


USD 7.5 per mmbtu for new

Revamp Urea units

(a) the Floor price is fixed at USD

245 per MT of Urea







USD 2.2 per MT up to a


per mmbtu.

Revamp Projects

(b) Floor by USD 2.2 per MT for


USD 14 per mmbtu.

(iii) The urea from Revamp Urea units

will be recognised at a uniformrate of 85% of IPP (C&F) subject

to floating floor and ceiling prices

mentioned at 5 (i) and 6 (i i)

above. These will be applicable for

all output above the cut-off point.

(iii-a)Cut-Off Quantity - The urea

produced from exist ing units

beyond their reassessed capacity

under NPS or the max imumachieved capacity by a unit for

330 days in last four years (2003-

07), whichever is higher (cut off

quantity), is recognised as the

production under revamp of the

existing unit. However, the urea

produced under revamp quantity

will only be eligible for the above

d ispensa t i on once the t o

Documents

Annual Report2012 13