Urea investment policy under discussion, not rejected: FAI

"It is still under discussion and a consensus proposal will definitely emerge that will enable the country to put up more units and more investments in the urea sector," says Chander.

He says that though the new urea investment policy has nothing to do with the Nutrient Based Subsidy (NBS), ultimately, they will need to be merged. "It means that if subsidy level of X is given to the existing plants, then to the new plants subsidy level of X + Y need to be given, in order to have both old and new plants at the same level, in context of subsidies," he further explained.
 
Below is an edited transcript of Satish Chander's interview to CNBC-TV18. Also watch the accompanying video.

Q: Which part of the policy has been rejected and what the issues of objection are from the Finance Ministry?

A: There are two things which are under consideration now — one is the nutrient based policy for the existing urea based plants, where we produce about 22 million tonnes of urea and second is the setting up of the new units. So what has appeared in the media is with reference to a proposal which was put under table regarding what should be the new investment policy. I think this policy is under discussion and various proposals have been given by the various stake holders including Fertilser Association of India and the Ministry of Agriculture. So, these are under discussion. To say that the proposal has been rejected is not the right way to look at things. It is still under discussion and a consensus proposal will definitely emerge that will enable the country to put up more units and more investments in the urea sector.

Q: So, you are saying this does not pertain to the Nutrient Based Subsidy (NBS) in any form?

A: It has nothing to do with NBS. NBS is for the existing plants and this is the new investment policy. Of course, at the end of the day, this will also have to merge with the NBS policy, which basically means that if subsidy level of ‘X’ is given to the existing plants then to the new plants subsidy level of X + Y has to be given because of the capital investment cost which is about USD 1 billion to set up 1.2 million tonnes of plant. Hence, it will have a linkage but that component has to be quantified as to how the capital cost will be reimbursed, so that both the old and new plants are at the same level, in context of the subsidy.

Q: Reports said that the Finance Ministry officials have called the New Investment Policy unrealistic and unviable because of the high subsidy outgo, what did you make of that?

A: The way to look at the thing is that firstly, the new plant should get domestic gas. Once, they get the domestic gas then the contentious issues are narrowed down substantially. Secondly, at what price production should it be recognised? The country is already importing 7 million tonnes at Import Parity Pricing (IPP). We from the industry are saying that give us the domestic gas and the IPP which you are giving to international suppliers, so, there is not loss as far as the government is concerned, if this model is expected.

Q: The concern also seems to be that apart from this particular development there doesn’t seem to be any headway, any development on the core NBS policy either. What has happened on that front because last we heard apparently the recommendations there as well have been shot down by the Fertiliser Ministry this time?

A: We have to move forward, there is no way out. I agree there is some delay but there is no other way forward. We have to bring some reforms in the fertiliser sector. We have started with the phosphorus and potassium (P&K) sector, we have to take the process forward otherwise we will lose out public money.

If urea is sold at one-third or one-fourth price of phosphatic fertiliser, the farmer will tend to use that more with the result that with no results. So, if the government continues to pay the subsidy, we import more urea. Today we are giving urea to the farmer at about USD 110, Rs 5310 is the MRP per tonne. We have to look in proper perspective and take the policy forward.