New energy norms for urea plants may save Rs 800 cr in subsidy

Fertiliser subsidy stood at about Rs 70,000 cr during last fiscal

The government has issued revised energy norms under the new urea policy for existing 25 gas-based urea plants in the country, a move that is expected to save about Rs 800 crore in fertiliser subsidy.

As per the norms issued by the Fertiliser Ministry, all the gas-based urea manufacturing plants are divided into three groups and a specific energy norm is fixed for each plant.

Fertiliser subsidy stood at about Rs 70,000 crore during the last fiscal.

Under the first group, plants can consume 5.5 g.Cal of gas per tonne of urea, plants under second group can consume 6.2 g.Cal of gas and those in third group can consume 6.5 g.Cal of gas.

Gas constitutes of about 65-70% of the cost of production of urea and cost of gas used is reimbursed by the government in the form of subsidy.

"...We have issued the new energy norms for all the 25 gas-based urea plants and as per these norms it is estimated that there will be savings of Rs 800 crore in subsidy payments on account of cost of gas," a source said.

The new norms have been issued as per the new urea policy which was cleared by the Cabinet in May this year.

The Policy has the objective of maximising indigenous urea production and promoting energy efficiency in urea units to reduce the subsidy burden on the Government.

The Cabinet had already approved the pooling of gas to provide gas to all urea plants at a uniform price.

The government had already decided in January to allow urea producers to produce neem coated urea up to 100 percent of production.

Neem coated urea is required less in quantity with same plot size and gives higher crop yields.

The MRP of urea for the farmers is fixed at Rs 268 per bag of 50 kg, excluding local taxes. Government pays the difference between cost of production and selling price as subsidy to the companies.

India produces about 22 million tonnes of urea and imports about 8-9 million tonnes to meet the domestic shortfall.