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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
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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
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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,
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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
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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
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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
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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:
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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-
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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
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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
USD 335 per MT of Urea
(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.
(i) At a delivered gas price of upto
USD 6.5 per mmbtu for Expansion
/ Brownfield Urea units
(a) the Floor price is fixed at USD
285 per MT of Urea
(b) the Ceiling price is fixed at
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USD 310 per MT of Urea
(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
U S D 2 p e r M T u p 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) 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
(i) At a delivered gas price of upto
USD 7.5 per mmbtu for new
Revamp Urea units
(a) the Floor price is fixed at USD
245 per MT of Urea
(b) the Ceiling price is fixed at
USD 255 per MT of Urea
(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
USD 2.2 per MT up to a
delivered gas price of USD 14
per mmbtu.
Revamp Projects
(b) Floor by USD 2.2 per MT for
delivered gas price exceeding
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