IFFCO slams move on urea purchase

IFFCO, India's largest fertiliser firm, has termed as unsustainable the move to remove guaranteed purchase of most of urea manufactured by new plants, in the new Urea policy.

Fertiliser Ministry had moved a proposal to CCEA for replacing the guaranteed buyback clause from the policy with a bidding process where government will buy crop nutrient from producers offering the lowest price.

"You cannot have investment policy based on pricing policy. Investment policy should be based investment," Indian Farmers Fertiliser Cooperative (IFFCO) Managing Director U S Awasthi said.

IFFCO was also one of the companies which had applied under the present policy, for the brownfield expansion at its Kalol plant in Gujarat.

The guaranteed buyback clause had led to flood of applications from companies for expansion of plants.

The government however needed only 4-5 plants to meet the urea requirement.

Awasthi said he had also given a suggestion to decontrol urea and provide fertiliser subsidy directly to farmers saying this is the only solution of fertiliser industry problems.

"If there is no guaranteed buy back clause then why businessmen will invest money, see you have to have a policy which is sustainable this policy is not sustainable," he said.

However, the proposal to amend the policy was supposed to be taken up in the CCEA meeting on November 13, but was dropped at the last moment.

Urea production in the country is stagnant at 22 million tonnes and the gap of 8 million tonnes is met through imports.

The policy was formulated with the purpose of substituting the imports by raising domestic output of urea.

The policy had guaranteed buyback of urea for eight years from start of production.

Government controls urea sector and has fixed the maximum retail price at Rs 5,360 per tonne.

Difference between maximum retail price and production cost is reimbursed as subsidy to fertiliser companies.

The Ministry wants to put in place transparent and objective criteria for giving approval to the proposals received so that only as much capacity is added as is required to meet the demand-supply gap.