The Union Cabinet of the Indian Government has approved a new National Investment Policy for urea – the first in almost 14 years – to facilitate investment in 8 - 9 gas-based greenfield and brownfield plants with a combined production capacity of 10 million t.
The proposed capacity expansion plan will involve private and public sector firms, as well as cooperatives. The new investment framework is an updated version of the 2012 New Investment Policy (NIP).
Key changes from the 2012 policy include separating fixed and variable costs for greater transparency, introducing a return-on-equity band with a floor of 12% and a ceiling of 16%, and mitigating foreign-exchange risk by converting fixed costs into rupees after four years based on prevailing exchange rates. “These measures are estimated to result in savings of more than R250 crore for each plant established under NIPU-2026 compared with NIP-2012,” the fertilizer ministry said in a statement.
Each of the upcoming plants will have an estimated production capacity of about 1.27 million tpy. According to EY India, every million tonne of domestic urea capacity replacing imports could save US$300 - 500 million in annual foreign exchange outgo, while also reducing the subsidy burden of imported urea.
“For the fertilizer industry, it creates greater confidence to invest in modern, efficient and environmentally responsible production facilities. These plants would also create 20 000 – 30 000 jobs during construction and around 50 000 direct and indirect jobs,” said Satyam Shivam Sundaram, partner, government and public sector, EY India.
Sources said the new investment policy includes a provision under which plants commissioned within five years of notification will be eligible for incentives for the following eight years, including a possible guaranteed buyback arrangement.
The push to expand domestic urea production gathered momentum as geopolitical tensions in the Middle East as a result of the US-Israel war in Iran disrupted imports and drove up costs.
Read the original news release here.