Lok Sabha Question No. 1595 (UNSTARRED), answered on 2017-07-25
Subject: Investment in Fertilizer Sector
Ministry: CHEMICALS AND FERTILIZERS
Asked by: JAGDAMBIKA PAL

## GOVERNMENT OF INDIA MINISTRY OF CHEMICALS & FERTILIZERS DEPARTMENT OF FERTILIZERS

## LOK SABHA

UNSTARRED QUESTION NO. 1595

TO BE ANSWERED ON:

25.07.2017

## INVESTMENT IN FERTILIZER SECTOR

1595:  SHRI JAGDAMBIKA PAL:

Will the Minister of CHEMICALS AND FERTILIZERS be pleased to state:

- (a) Whether the fertilizers industry has failed to attract investment for quite some time and if so, the reasons therefor;
- (b) Whether the Government has formulated any pricing policy for the sale of fertilizers and if so, the details thereof;
- (c) the targets fixed with regard to production of fertilizers during the next five years; and
- (d) the steps being taken to achieve the same?

## ANSWER

MINISTER  OF  STATE  IN  THE  MINISTRY  OF  CHEMICALS  &  FERTILIZERS, SHIPPING, ROAD TRANSPORT & HIGHWAYS

## (SHRI MANSUKH L. MANDAVIYA )

(a) :     The Government has notified New Investment Policy - 2012 on 2 nd January, 2013 and its amendment on 7 th October 2014 to facilitate fresh investment in urea sector and to make India self-sufficient in the urea sector. Based on NIP - 2012, any  interested  company  can  establish  urea  plants  in  the  country.  At  present, Department of Fertilizers has 2 active proposals, i.e. Matix Fertilizers & Chemicals Limited (Greenfield project at Panagarh, West Bengal) and Chambal Fertilizers & Chemicals  Limited  (Brownfield  project  at  Gadepan,  Rajasthan)  for  setting  up  of urea projects.

So far as P&K fertilizers is concerned, the country has very little reserves of fertilizer raw material and natural gas in the country. There is no known source of potash reserves in the country and for phosphate the country depends on imports for its 90% requirement. Natural gas in the country is scarce and the domestic gas allocated for fertilizer sector has been allocated exclusively for Urea. Production of ammonia  required  for  producing  P&K  fertilizers  through  imported  RLNG  is  very costly as compared to imported ammonia. Under the above conditions, indigenous production  of  P&K  fertilizers  is  not  always  viable.  Hence,  P&K  fertilizer  industry except SSP industry is unable to attract investment.

However, a large number of SSP units have come up after NBS policy. The number of SSP units has increased from 73 in 2008-09 to 108 in 2016-17. Even the production of SSP has also increased from 25.34 LMT in 2008-09 to 43.38 LMT in 2015-16.

(b) :     The urea is sold at a statutorily controlled price fixed by the government and at present is Rs 5360 per MT (exclusive of taxes).

So  far  as  P&K  fertilizers  is  concerned,  the  market  price  is  open  and  fertilizer companies are allowed to fix MRPs at reasonable level. It is mandatory for all the fertilizer companies to submit along with their claims of subsidy, certified cost data in the prescribed format and as per the requirement for the purpose of monitoring of MRPs  of  P&K  fertilizers  fixed  by  the  fertilizer  companies.  In  cases,  where  after scrutiny, unreasonableness of MRP is established or where there is no correlation between the cost of production or acquisition and the MRP printed on the bags, the subsidy  may  be  restricted  or  even  denied  if  the  product  is  otherwise  eligible  for subsidy under NBS. In proven case of abuse of subsidy mechanism, DoF, on the recommendation of IMC may exclude any grade/grades of fertilizers of a particular company or the fertilizer company itself from the NBS scheme.

(c) & (d) :     Department of Fertilizers sets annual targets for major fertilizers and therefore, the production target of Fertilizers in the next five years is not available. Target fixed for the current year 2017-18 of major fertilizers are given below: -

| Product Name   |   Target ( Fig. in LMT) |
|----------------|-------------------------|
| Urea           |                  241.69 |
| DAP            |                   50.31 |
| Complexes      |                  100.99 |

The Government of India has notified the New Urea Policy (NUP) - 2015 on 25 th May,  2015  for  existing  25  gas  based  urea  units  with  the  objective  of maximizing  indigenous  urea  production,  promoting  energy  efficiency  in  urea production and rationalizing subsidy burden on the government.

NUP-2015 has led to additional production of approximately 20 LMT during 2015-16 as compared to 2014-15, from the existing gas based urea plants and the total  production of urea during the year 2015-16 was 244.5 LMT, i.e. the highest ever urea production in the country. The indigenous urea production for 2016-17 was 242.01 LMT.

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