The Cabinet Committee on Economic Affairs on Wednesday approved a new investment policy for the urea sector to attract fresh investments in domestic manufacturing and reduce India’s dependence on imported fertilisers.
The National Investment Policy for Urea-2026 (NIPU-2026) replaces the previous investment policy, which expired in 2019, and seeks to encourage the setting up of gas-based urea manufacturing plants in the country to bridge the gap between domestic production and demand.
According to an official statement, the policy introduces several changes to the 2012 framework, including separating fixed and variable costs for greater transparency, introducing a return on equity band of 12-16%, and reducing foreign exchange risk by converting fixed costs into rupees after four years, based on prevailing exchange rates.
These changes are expected to save more than ₹250 crore over the life of each plant established under the new policy compared with projects approved under the 2012 policy, the statement said.
It said India has 33 operational urea manufacturing units with a total installed capacity of 26.94 million tonnes annually. However, domestic production continues to fall short of demand, leading to substantial imports of urea.
The government said new gas-based urea plants set up under NIPU-2026 would help increase indigenous production and move the country closer to self-sufficiency in urea.
The 2012 policy had led to the establishment of six new urea plants. Four of them were joint ventures involving public sector companies, and two were set up by private firms.
The new framework was necessitated to support future capacity expansion in view of proposals for new urea projects received by the Department of Fertilisers.
