When allocation of urea under ECA 1985 was brought to 50% of installed reassessed capacity and remaining 50% was free (unrestricted) to sale by manufacturer to farmers?
Under the New Pricing Scheme, the allocation of urea under the Essential Commodities Act. 1955 (ECA) during the year 2003-04 was restricted upto 75% and 50% of reassessed installed capacity of each unit in Kharif 2003 and Rabi 2003-04 respectively. The remaining 50% urea production was available to the manufacturers for sale to the farmers at Maximum Retail Price (MRP) anywhere in the country. The Department of Fertilisers (DOF) had the authority to make suitable adjustments in view of demand and supply positions in the ECA allocation. For more details, please go to point no. 63 (page no. 34) of Second Report of Standing Committee on Chemicals & Fertilisers (2004-05) or go to link https://eparlib.nic.in/bitstream/123456789/62613/1/14_Chemicals_And_Fertilizers_2.pdf Department of Fertilisers have also clarified in their notification no. 12012/3/2006-FPP dated 8th March 2007 to FICC, in point F (Distribution and Movement Issues ) 7.i , as per below mentioned details: "The Government will continue to retain the authority to direct movement of urea stock up to 50% of production depending upon the exigencies of the situation". For more details, please go to DOF notification dated 8th March 2007 or go to link https://fertiliserindia.com/policy-for-stage-iii-of-new-pricing-scheme-for-urea-manufacturing-units/
Which urea plants have commissioned and expected to be commissioned in future in India under NIP 2012?
- Matix Fertilisers And Chemicals Limited (Commissioned in Oct 2017)
- Chambal Fertilisers And Chemicals Limited Gadepan III (Commissioned in Last Quarter of 2019-20)
- Ramagundam Fertilisers And Chemicals Limited (Commissioned in Last Quarter of 2020-21)
- Hindustan Uravarak & Rasayan Limited - Gorakhpur Plant ( Expected to be Commissioned in 2nd / 3rd quarter of 2021-22)
- Hindustan Uravarak & Rasayan Limited - Barauni Plant ( Expected to be Commissioned in last quarter of 2021-22)
- Hindustan Uravarak & Rasayan Limited - Sindri Plant( Expected to be Commissioned in last quarter of 2021-22)
- Talchar Fertiliser Limited (TFL) ( Expected to be Commissioned in 2024-25)
What is the legal binding between a fertilizer company and government of India for fertiliser subsidy realisation?
All the fertilizer manufacturers and importers are registered by Department of Fertilizers under Ministry of Chemicals and Fertilizers Government of India and registration and company ID is allotted to all registered manufacturers and importers. Payment of subsidy to the registered fertiliser manufacturers and importers are covered under various subsidy schemes notified by Government from time to time. No further agreement between registered manufacturers / importers and GOI is required to claim / receive the subsidy. In India, Sales of fertiliser to the end user (farmers) is captured thru POS (Point of Sales) machine and integrated with the govt owned i FMS system. The registered fertiliser manufacturers receive the subsidy based on the iFMS data integrated to the rate of subsidy as notified by GoI from time to time, to applicable groups / manufacturers / importers.
What is the legal binding between a fertilizer company and their distributor for sale and purchase of fertilizers?
The indigenous/imported fertilizers can be sold only thru licensed dealers, having sale license (Fertiliser Registration Certificate) issued by the state government. Accordingly, fertilizer manufacturers / importers enter into legally binding dealership agreements with such licensed dealers. The Company enters into dealership agreement which is a legal document defining the rights and obligations of the seller and the purchaser enforceable legally under the Indian Contract Act. This dealership agreement also have provisions of dispute resolution thru mutual discussions, arbitration under arbitration act and failing which can be legally enforced in the court of law, having jurisdiction as decided by the company. The payment obligations related with sale and purchase are fully protected within the legal framework.
What is subsidy paid by Government of India on Fertilizers?
The difference between the delivered cost of fertilizers at farm gate and MRP payable by the farmer is given as subsidy to the fertilizer manufacturer/importer by the Government of India.
What are the Urea Policies implemented so far related with subsidy payment to Urea Manufacturing Units so far since beginning?
The following policies related with subsidy payment to urea manufacturing units were implemented since 1977:
- Retention Price Scheme (RPS)11.1977 to 31.03.2003
- New Pricing Scheme (NPS) - I for the period from 01.04.2003 to 31.03.2004
- New Pricing Scheme (NPS) – II for the period from 01.04.2004 to 31.09.2006
- New Pricing Scheme (NPS) – III for the period from 01.10.2006 to 01.04.2014
- Modified New Pricing Scheme (NPS) – III for the period from 02.04.2014 to 31.05.2015
- New Urea Policy (NUP) – 2015 for the period 01.06.2015 to 31.03.2019 (Applicable for 25 gas based urea units)
- Amended New Urea Policy NUP – 2015 notified on 28th March, 2018
- New Investment Policy – 2012 notified on 2nd January, 2013
- Amended New Investment Policy – 2012 notified on 7th October, 2014
As on 31.03.2021, How many urea manufacturing units are there n India?
As on 31.03.2021, there are 31 urea manufacturing units in India, out of which 28 urea manufacturing units are based on Natural Gas (using domestic gas/LNG/CBM) and three urea manufacturing units are based on Naphtha as feed-stock.
Is MRP of Urea fixed by Government of India? What is the Maximum Retail Price (MRP) of Urea in India?
Yes, The MRP of urea is statutorily fixed by the Government of India and at present, it is Rs. 242 for a 45 kg bag / Rs. 268 for a 50 Kg bag of urea / bag of urea which includes Rs. 354/MT as dealer margin for private traders/PSUs/Cooperatives and Rs. 50/MT which is paid to retailers for acknowledging the receipt and reporting the stock in mFMS / iFMS as additional incentive. These rates are exclusive of GST or applicable tax and other charges towards coating like in case of Neem Coated, it is 5% extra and in case of other coated (Zinc / Boron etc.), it is 10%.
Whether Government of India gives subsidy on freight?
The Government of India subsidies the urea manufacturing units for the cost of transportation to facilitate the availability of urea at the same maximum retail price all over the country.
What is New Investment Policy – 2012 for Greenfield / Revival / Brownfield Urea Manufacturing Projects?
- GoI has notified New Investment Policy – 2012 on 2nd January, 2013, for gas based urea manufacturing plants.
- Floor and ceiling price is calculated at delivered price of gas from US $6.5 to US $ 14/mmbtu.
- The floor price has been determined at a Return on Equity (RoE) of 12% and the ceiling price at a RoE of 20%.
- Floor and ceiling shall increase in tandem with increase in delivered gas price for Greenfield/Revival and Brownfield Projects.
- Every USD 0.1/mmbtu increase in delivered gas price will increase the floor and ceiling by USD 2/MT upto delivered gas price of USD 14/mmbtu.
- Beyond delivered gas price of USD 14/mmbtu, only floor will be increased.
- In case of revamp projects, floor and ceiling have been linked to delivered gas price of USD 7.5/mmbtu and floor and ceiling shall increase by USD 2.2/MT for every increase in delivered gas price of 0.1/mmbtu.
- It encourages investment by Indian industry in Joint Venture abroad in resource rich countries
- For units in North Eastern states, the special dispensation regarding gas price that is being extended by GOI/State governments will be available to any new investment. Suitable adjustments will be made to applicable floor and ceiling price in case the delivered price (after allowing for special dispensation) falls below USD 6.5 per mmbtu, subject to approval of Ministry of Finance.
Any Tax incentives/Tax holiday support from Central Govt. for new urea project?
No additional tax benefit from what are available for such projects(at both Central and State level) has been announced for new urea Project.
Will the feedstock be provided at APM Price?
Pricing of Gas shall be applicable as per the prevailing policy. As per the current policy, gas to all Urea players is to be provided on a uniform pooled price.
Would NIP-2012 not apply if 5-year commercial production period condition is not fulfilled?
Yes, Para No. 8.1 of NIP 2012 was amended / replaced and notified on 7th Oct., 2014 and as per this amendment, “Only those units, whose production starts within 5 years from the date of this amendment notification, will be covered under this policy”.
Has DBT system is fully implementation in India? What is the delay in releasing the payment of subsidy bill, after DBT system? Will it help to decrease delay in subsidy payment?
DBT is fully implemented PAN India w. e. f. 1st March, 2018. Subsidy bill after purchase of fertilizers by farmers thru PoS, is generated and duly certified bill by company statutory auditor is claimed on weekly basis, Subsidy payment is released within 7 days of submission of subsidy bill. Currently (as on 31.03.2021), there is no delay on subsidy reimbursement on weekly bills.
What is LFS and how a company is designated as LFS ? Whether the company gets priority to sell its production in their own home state and neighbouring states over players from other regions?
- LFS is lead fertiliser supplier who coordinate with all fertiliser companies operating in the state on behalf of state agriculture department, to ensure availability of fertilisers across all the blocks / districts of the state throughout the years by doing exercise of requirement v/s availability as per cropping patters and cropping area.
- It is general practise of the Agriculture Departments of the State Govt to nominate large fertiliser manufactures unit of their own state / nearby state, as LFS. The local fertiliser company has normally largest stake in the local market and they understand the agriculture requirement of the state better. Government of India while allocating the urea to various states ensures that the local manufacturer gets the maximum allocation in their own state as it saves freight subsidy of the government.
If company plans to sell its production to its domestic region / market, then on what basis company will receive freight expenses reimbursement on urea? What are the term of freight expenses reimbursement?
Urea is covered under Uniform Freight Policy of Government of India, which reimburses freight incurred in movement of fertilisers as per following Freight Reimbursement Methodology:
- Primary Freight (Rail) – 100% reimbursement from Plant to respective rail head of districts, based on RR copy.
- Primary Freight (Road) – Road freight reimbursement for direct road movement of fertiliser from Plant ( upto 500 Kms radius) shall be paid at the lower of actual freight expenditure or freight amount calculated based on the approved district lead from plant and normative freight Per MT Per Km notified by DOF, based on m FMS data.
- Secondary Freight (Road) – Road freight reimbursement for the road movement of fertiliser from district rail head to various destinations (retailers/ dealers/WHs) upto the block level shall be paid at the lower of actual freight expenditure or freight amount calculated based on the approved district lead and normative freight Per MT Per Km notified by DOF, based on m FMS data.
- All above freight reimbursement bill is generated and duly certified bill by company statutory auditor is claimed on monthly basis.
How the company manage its product flows during lean period / low seasons? Accumulating stocks? Selling to other regions (with lower product shortage and having their own local players?
Company decide its marketing territory based on various factors specially diversified area in terms of crop, soil and monsoon rainfall distribution pattern. The low and peak of the fertilizer application season is well studied and documented. The distribution and logistics plans are diligently prepared to ensure that there is no shortage or surplus in the particular area round the year. The entire marketing territory is also covered with hired storage space for storing the material for short period if necessary. Most of the companies have started working on PAN India crop based strategy within radius of 1500 Kms, to liquidate their product throughout the year especially in low/off-season. Company also framed its all the branding and farmers activities & service strategies based on cropping patterns and cropped area, so that they could take care of their lean period / low season.
How urea fertiliser is sold in India? Who bears the price difference between cost of production and MRP?
In India, the indigenous manufactured / imported urea fertiliser is only sold to the dealers and retailers having license (Fertilizer Registration Certificate) issued by the respective State Government. Accordingly, urea fertiliser manufactures / importers appoint dealers in various states of their market area and enter into legally binding dealership agreements with such licensed dealers. Sales of urea fertilizers to the end user (farmers) is captured through POS (Point of Sales) machine and integrated with the Government of India owned iFMS system. The manufacture / importer has to invoice for such sales to their dealers as per Maximum Retail Price (MRP) plus Statutory Taxes & Duties as notified by the GOI from time to time. In order to provide urea to the farmers at affordable prices the MRP is fixed by Government of India, at much lower rate than as compared to the cost of production. The GOI bears the difference between applicable price of urea to the manufacturer / importer and the MRP, which is called subsidy on fertilizers under GOI’s budgetary allocation.
What is DOF’s role in movement of urea fertilizer in India?
The Department of Fertilisers (DOF) advise all State Governments to assess the requirement of fertiliser in their state - agriculture season wise (Kharif and Rabi). The State Government collects the full data on micro level i.e. block & district level, according to their cropping patterns and cropped area targets and a consolidated demand is put before the DOF. The DOF also collects the production plan of each & every urea manufacturing units and compiles the total indigenous / domestic urea production data on annual, season and monthly basis. The DOF, based on total production and total estimated demand, determines the shortfall between the requirement and availability and estimates the urea to be imported every year. The Department of Fertilisers (DOF) also organises Zonal Conference twice a year for Kharif (April to September) in the month of Feb / March and for Rabi (October to March) in the month of August / September. Based on the state wise urea plan proposed by companies / data collected, the Department of Fertilisers makes zone wise state wise company wise ECA (Essential Commodity Act) allocation of urea fertiliser to be produced / dispatched by the indigenous urea manufacturer. The entire allocation process is completed well before the commencement of each agriculture season. The Department of Fertilisers (DOF) gives ECA allocation for 50% of production projected by the individual urea manufacturing units / companies for the agriculture seasons. For the remaining 50% of production (Non-ECA quantum), Department of Fertilisers gives choice to the producer to propose their distribution plan within their marketing area on a monthly basis. The DOF reviews the producers’ proposed distribution plan of Non-ECA quantity, on monthly basis, and based on demand & availability situation, the DOF approves and issues a Movement Supply Plan (Company wise, State-wise & District-wise Company wise). In essence, Govt. of India through The Department of Fertilisers (DOF), ensures that fertiliser is made available across the country and throughout the year to ensure that there is no shortage / surplus urea available in a particular market. Government also ensures that all the products manufactured / imports by indigenous manufacturers / importers is sold in Indian markets through ECA allocation and movement systems and becomes eligible for subsidy reimbursement.
How urea fertiliser subsidy is claimed and payment is made by Goverment of India?
The Department of Fertilisers (DOF) monitor and control of Urea Fertilisers, right from production, dispatch / movement and up to the sale to the farmers, through a government owned mFMS / iFMS apps / computerized online systems. Manufacturer regularly uploading all the data (Production, Dispatch / Movement & Sales) into the iFMS (Integrated Fertiliser Monitoring System) owned and operated by DoF, for the urea manufactured in their unit, on time bound basis. Dealers and Retailers also update / acknowledge the material received, dispatched & sold by them to the farmers. The production subsidy claims are generated on weekly basis from the iFMS (Integrated Fertiliser Monitoring System) owned and operated by DoF, on the quantity of urea purchased by farmers and Freight subsidy claims are generated on monthly basis from the iFMS (Integrated Fertiliser Monitoring System) owned and operated by DoF, as per price recognized under Policy applicable to the manufacturer notified by DoF.
What is Cut-Off quantity of urea as per NIP – 2012 & NIP-2014 for the purpose of subsidy eligibility?
NIP – 2012 & NIP-2014 policy is silent on Cut-off quantity of urea for the purpose of subsidy eligibility for green field projects.
What is the mechanics for subsidies reimbursement?
Company get subsidy from the government equal to the difference between “farm-gate price” (=MRP, paid by customer) and NIP-2012 price
What is the current practice of paying subsidies and what is the time period between sale and receipt of the subsidies from the government, in India?
The subsidy bill is generated from government owned monitoring apps ( i FMS) on weekly basis for the quantity purchased by farmers. A duly certified (by statutory auditors) subsidy bill is submitted to department of fertilizers, which is cleared within 7 days of submission.
What is the history of subsidy payment delays?
Initially, there was an abnormal delay in subsidy bill payment but after introduction of DBT / iFMS, payment drastically improved and now releasing within 7 days of subsidy bill submission.
What percentage of transportation costs in urea is subsidized by Government of India? Please, describe applicable transport costs incentives in urea.
Governments of India reimburse 100% freight cost based on uniform freight policy as per below:
- Primary Freight 1 - Rail freight from plant to rake point of consumption center is 100% reimbursed by GoI.
- Primary Freight 1 - Road freight from plant to consumption center upto 500 Kms. Is 100% reimbursed by GoI on approved rates as per actual / normative lead of districts and normative freight Rs. per Km per MT basis.
- Primary Freight 2 - Road freight from rake point to various destinations of blocks / districts is reimbursed 100% based on normative lead of districts and normative freight.
Can Company sell urea above MRP (maximum retail price)?
No one can sell urea beyond MRP and as per policy, MRP of urea is fixed time to time by Department of Fertilisers, Government of India.
Can company sell ammonia to 3rd parties or 100% of produced volume is used for the purposes of urea production?
As per DOF policy, ammonia production is used 100% for production of urea, however in case of any technical reason / problem, urea production is stopped and ammonia production continues, then DOF allow sale of ammonia.
What urea sales price, a new urea project / company will charge after 8 years of subsidized period? What would be the MRP after 8 years? Why company are expecting urea sales at “subsidized price” after 8-year horizon?
Government ensure availability of urea throughout the year at affordable price to the farmers across the India, to ensure food security, hence government support farmers by providing subsidized fertilizers at affordable price since 1977 through various subsidy policies implemented time to time. Government monitors all the steps from manufacturing to till application at field through their apps called mFMS / iFMS. Current policy NIP 2012 / NIP 2014 clearly says a period of 8 years but Government will continue to support farmers to provide fertilizers at affordable price even after 8 years either by extending the same policy or by introducing some other subsidy policy. Since urea share is around 70% of total fertilizers, hence cannot be ignored. Since MRP is fixed by the government of India, hence MRP of urea will be according to govt. policy at that time.
What is current (as on 31.03.2021) urea production capacity in India?
As on 31.03.2021, current urea production capacity in India is 24.6 Mn tons. If you want to know company-wise urea production last 10 years, please go to https://fertiliserindia.com/company-wise-urea-production-in-india/
What is current (as on 31.03.2021) urea sales / demand in India?
As on 31.03.2021, current urea sales / demand in India is 35.1 Mn tons. If you want to know company-wise urea sales / demand last 10 years, please go to https://fertiliserindia.com/urea-sales-in-india-year-wise-state-wise-fy-2010-11-to-fy2020-21/
How much quantity India has imported urea in FY' 2020-21?
In FY' 2020-21, India has imported 9.8 Mn tons. If you want to know company-wise urea imports during last 5 years, please go to Urea Imports Last 5 Years
Is there any legal binding agreement entered into between manufacturer and Department of Fertilisers, Government of India?
The Government does not enter into separate legal agreement with each individual manufacturer for applicable pricing policy. The Policy issued by DoF is a commitment by Government of India (like a sovereign guarantee) for the purposes of subsidy claims and have been in practice in industry efficiently for many years (since 1977). The registration of a manufacturer under a particular policy regime is sufficient to make the benefits of the policy applicable to the manufacturer. The operating principles are governed by notifications issued by the government from time to time and applicable to all manufacturers. A separate division of dedicated officers in DOF look into all subsidy related claims and release of subsidy to the urea manufacturers.