What is ROE (Return on Equity) on ceiling price?
The ceiling price has been determined at a return of equity (ROE) of 20%
What is ROE (Return on Equity) on floor price?
The floor price has been determined at a return on equity (ROE) of 12%
What is Amended New Urea Policy NUP – 2015?
Department of Fertilizers, GoI has notified few amendments on New Urea Policy NUP – 2015, on 28th March, 2018, with regard to Target Energy Norms given to all urea manufacturing units (except BVFCL). (i) For 11 urea manufacturing units viz., YFIL, NFL-Vijaypur-II, GIL, CFCL-Gadepan-I & II, IFFCO-Aonla-II, RCF-Thal, IFFCO-Kalol, IFFCO-Aonla-I, IFFCO-Phulpur-I &II, the target energy consumption norms as mentioned in Para 3.2 of NUP-2015, will come into force w. e. f. 1st April, 2018. (ii) The existing norms under New Urea Policy-2015 for remaining 14 urea manufacturing units viz., NFL Vijayppur-I, KRIBHCO-Hazira, KFL-Shahjahanpur, NFCL-Kakinada-I, NFCL-Kakinada-II, GNFC-Bharuchm GSFC-Vadodara, NFL-Bathinda, NFL-Nangal, NFL-Panipat, SFC-Kota, KFCL-Kanpur, RCF Trombay-V, ZACL-Goa are hereby extended for further period of 2 years i.e. till 31st March, 2020 with the following penalties: (a) Penalty equivalent to 2% energy of difference between NUP Energy norms and Target Energy norms of NUP-2015, for the first year i.e. 2018-19. (b) Penalty equivalent to 5% energy of difference between NUP Energy norms and Target Energy norms of NUP-2015, for the second year i.e. 2019-20. (c) Urea manufacturing units must achieve Target Energy Norms during the extended period of 2018-19 to 2019-20 failing which additional penalties may be imposed on defaulting units in consultation with the Department of Expenditure. (iii) The aforesaid target energy norms may be continued upto 31st March, 2025. Meanwhile, an expert body under NITI Aayog would be engaged to recommend the energy norms to be achieved from 01st April, 2025. (iv) The three Naphtha based urea units viz., MFL, MCFL, SPIC are also allowed the existing energy norms under Para (2) of policy notification dated 17thJune, 2015 for another two years i.e. till 31st March, 2020 or till these units get the gas pipeline connectivity, whichever is earlier. There will be no mopping up of energy efficiency for a fix period of 5 years from date of gas pipeline connectivity as per Para 3 (viii) and 5 (ii) of NPS-III policy dated 8thMarch, 2007.
Which are the Naphtha based urea manufacturing plants in India?
As on 31st March, 2021, Madras Fertilizers Limited- Manali (CPSU), Southern Petrochemicals Industries Corporation (SPIC) - Tuticorin and Mangalore Chemicals & Fertilizers Limited (MCFL) are Naphtha based urea units in India.
What is subsidy policy for Naphtha based urea manufacturing units?
Subsidy does not exist for new urea manufacturing units based on Naphtha as feed-stock, however GoI allowing only three old Naphtha based units (MFL, SPIC & MCFL) for subsidy till gas availability and connectivity to these three units either by gas pipeline or by any other means. GoI notified policy for Naphtha based urea manufacturing units, on 17th June, 2015 and these units will be eligible for subsidy as per the following conditions: (i) Revised energy norms from the date of notification, which would be the simple average of pre-set energy norms of New Pricing Scheme (NPS) – III and lowest yearly specific energy consumption achieved during the years 2011-12, 2012-13 and 2013-14 or the pre-set energy norms of NPS – III, whichever is lower. (ii) The concession rate for these plants will be determined notionally on the basis of weighted average of the delivered cost of RLNG to recently converted plants after deducting state taxes (VAT, Entry tax) on RLNG or the cost of production of urea from Naphtha/FO after deducting state taxes levied on Naphtha/FO consumed for urea production (VAT, Entry tax) on Naphtha/FO, whichever is lower. (iii) The compensation for other variable cost e.g. the cost of bag, water charges & electricity charges and fixed cost will be determined in accordance with existing provisions of NPS – III and Modified NPS – III. The specific energy consumption norms for these three units from 2018-19 was fixed as 6.5 Gcal/MT.
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.
As on 31.03.2021, how many urea manufacturing units are there in 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 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 Urea Policy (NUP) 2015?
- The New Urea Policy-2015 (NUP-2015) notified by Department of Fertilizers on 25th May, 2015, and made effective from 1st June, 2015 upto 31st March, 2019.
- The objective of policy was to maximize indigenous urea production, promoting energy efficiency in urea production and rationalizing subsidy burden on the government of India.
- NUP – 2015, allowed 25 gas based urea manufacturing units to get the concession rate on the basis of revised energy norms fixed for each group from 1st June, 2015 to 31st March, 2018 which is the simple average of pre-set energy norms of NPS-III and average actual energy consumption achieved during three years (from 2011-12 to 2013-14) or the pre-set set energy norms of NPS-III, whichever is lower.
- The urea manufacturing units were given target energy consumption norms to be achieved in the year 2018-19, to all three groups as per below:
- The compensation for other variable cost e.g. the cost of bag, water charges & electricity charges and fixed cost are determined in accordance with existing provisions of NPS-III (notified on 8th March, 2007 ) and Modified NPS-III (2nd April, 2014).
- 25 gas based urea manufacturing units are eligible to get total cost of production of urea, which includes fixed cost and variable cost, on the production upto 100% re-assessed capacity (RAC).
- Production beyond RAC, these units are eligible for their respective variable cost and a uniform per MT incentive equal to the lowest of the per MT fixed costs of all the indigenous urea manufacturing units subject to IPP plus weighted average of other incidental charges which the government incurs on the imported urea.
- GoI further amended vide notification dated 7th April, 2017, for production beyond RAC during 2016-17. As per this notification, units were eligible beyond their respective variable cost and a uniform per MT incentive equal to the lowest of the per MT fixed cost of all indigenous urea units subject to sum of IPP, other incidental charges which the Government incurs on the import of urea and weighted average of Central Government levies of urea paid by the urea manufacturing units. In event of any fluctuation in IPP that would have adverse impact on the production beyond RAC by urea units, DOF is authorized to take appropriate decision in consultation with Department of Expenditure.
- MFL-Manali, MCFL-Mangalore, SPIC-Tuticorn, BVFCL-Namrup-II and BVFCL-Namrup-III are not covered under this scheme as these units are not connected to gas pipeline network.
What is Group Concession Scheme under New Pricing Scheme?
Group Concession Scheme under New Pricing Scheme implemented w. e. f. April, 2003 Under NPS, all manufacturing units were characterized into six group based on vintage and the feed-stock. For each group, weighted average group price was worked out barring the outlier (RPS more than +/ - 20% of group average). Every manufacturing unit will get the concession rate dependent on the group average or the retention price, whichever is lower. Outlier manufacturing units to get benefit of 50 percent of the difference between the RPS and the group average for a time of three years.
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 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
What is the Retention Price Scheme?
The Retention Price Scheme (RPS) for fertilizer Industry was introduced and implemented w. e. f. 1st November, 1977 and was remained in force till 31st March, 2003. Retention Price Scheme (RPS) was based on unit-wise cost plus approach. Under the RPS, Retention Price was fixed for each & every urea manufacturing unit by the Department of Fertilisers, Ministry of Chemicals & Fertilisers, Govt. of India. The difference between the Retention Price of Urea and the maximum retail price of urea was paid as subsidy. Retention Price (Rs/MT) = (CRC + Conversion Cost) +Variable Cost +Selling Expenses Subsidy was paid on the basis of Retention Price – MRP. Retention Price Scheme (RPS) was silent on buyback arrangement. but under Retention Price Scheme (RPS), the urea manufacturing units were entitled to the subsidy on the quantity leaving the factory gate. The Retention Pricing Scheme was replaced by New Pricing Scheme (NPS) w.e.f. 01.04.2003.