New Urea Policy - 2015

The Department of Fertilizers issued the comprehensive 'New Urea Policy - 2015' notification on May 25, 2015, effective from June 1, 2015. This pivotal policy aims to:

Maximise indigenous urea production
Enhance energy efficiency in urea production units
Rationalise the subsidy burden on the Government of India

Extension of the Policy

On April 1, 2019, the Cabinet Committee on Economic Affairs approved the extension of the New Urea Policy - 2015. It remains effective until further notice, except for provisions amended in the notification dated March 28, 2018. This extension underscores the ongoing commitment to agricultural and industrial synergy in India.

Urea Policy Overview

India has 31 urea production units, with 28 units using Natural Gas and 3 units using Naphtha as feedstock. The government sets the urea price at Rs. 268 for a 50-kg bag and Rs. 242 for a 45-kg bag, inclusive of a Rs. 354/Metric Tonne dealer margin for private traders, PSUs, and cooperatives, along with a Rs. 50/MT incentive for retailers reporting stock in mFMS (IIFMS).

In Uttar Pradesh, due to an additional VAT on natural gas, prices are Rs. 298 and Rs. 269 for 50 kg and 45 kg bags, respectively. These prices exclude applicable taxes like central excise duty, Integrated Tax, and others. The difference in farm gate delivery costs and MRP is subsidized for fertilizer manufacturers and importers by the Government.

Subsidy Payment Policies

New Pricing Scheme (NPS)-I: 01.04.2003 to 31.03.2004
NPS-II: 01.04.2004 to 31.09.2006
NPS-III: 01.10.2006 to 01.04.2014
Modified NPS-III: 02.04.2014 to 31.05.2015
NPS-III and modified NPS-III address both fixed and variable costs.
New Urea Policy - 2015: 01.06.2015 to 31.03.2019
Notification of June 17, 2015, for Madras Fertilizers Limited - Manali, SPIC - Tuticorin, and MCFL.

Classification of Urea Units

Existing gas-based urea production units are categorized as follows:

Group I:

Units with energy norms between 5.0 G Cal/MT to 6.0 G Cal/MT.

Group II:

Units with energy norms between 6.0 G Cal/MT to 7.0 G Cal/MT.

Group III:

Units with energy norms exceeding 7.0 G Cal/MT.

New Urea Policy Amendment

For production beyond Re-Assessed Capacity (RAC) during 2016-17, units receive compensation for costs and a uniform incentive per MT equivalent to the lowest fixed costs among indigenous units. This considers import parity prices and government-incurred incidental charges for urea imports. The Department of Fertilizers, in consultation with the Department of Expenditure, addresses price fluctuation impacts on production.

This policy encompasses efforts for strategic management and efficient production practices, impacting both private and public sectors. For additional details on policy updates and amendments, it's crucial to stay informed about changes in government regulations.

To streamline fertilizer production efforts effectively, it's essential to understand various energy norms and classifications of urea units, which contribute toward sustainable and economically viable agricultural practices.

For professionals and businesses in the agricultural sector, understanding the nuances of policies like the New Urea Policy is essential for compliance and optimal resource management, akin to fiscal responsibilities in business tax filing or state-level certifications.

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Frequently Asked Questions

Common questions about New Urea Policy 2015: Objectives & Amendments Analysis.

The New Urea Policy - 2015 is a notification released by the Department of Fertilizers, Government of India, implemented from June 1, 2015. Its main objectives are to maximize indigenous urea production, promote energy efficiency in urea units, and rationalize the subsidy burden on the government.

The Cabinet Committee on Economic Affairs has approved the extension of the New Urea Policy - 2015 from April 1, 2019, until further orders, except for provisions already amended in the notification dated March 28, 2018.

There are 31 urea units across the country, out of which 28 units use Natural Gas as feedstock, and the remaining 3 units use Naphtha as feedstock.

The Government of India has fixed the selling price of urea at Rs. 268 for a 50-kilogram bag and Rs. 242 for a 45-kilogram bag, excluding taxes and other charges. However, in Uttar Pradesh, the prices are higher due to the state's additional VAT on natural gas.

The difference between the deliveries cost of fertilizers at the farm gate and the Maximum Retail Price (MRP) payable by the farmer is given as subsidy to the fertilizer manufacturer/importer by the Government of India.

The existing gas-based urea units are classified into three groups based on their pre-set energy norms: Group I (5.0 G Cal/MT to 6.0 G Cal/MT), Group II (6.0 G Cal/MT to 7.0 G Cal/MT), and Group III (more than 7.0 G Cal/MT).

For production beyond RAC during 2016-17, the units will be entitled to their respective costs and a uniform per MT incentive equal to the lowest of the per MT fixed costs of all indigenous urea units, the sum of import parity price and other incidental charges, and the weighted average Central Government charges per MT of urea paid by the manufacturing units.

If there is any fluctuation in the Import Parity Price that adversely impacts the production beyond RAC by urea units, the Department of Fertilizers is authorized to take an appropriate decision by consulting with the Department of Expenditure.

The three main objectives of the New Urea Policy - 2015 are to maximize indigenous urea production, promote energy efficiency in urea units, and rationalize the subsidy burden on the Government of India.

The notification dated 17th June 2015 covers Madras Fertilizers Limited - Manali, Southern Petrochemicals Industries Corporation (SPIC) - Tuticorin, and Mangalore Chemicals and Fertilizers Limited (MCFL).