New Urea Policy 2015: Drawbacks

New Urea Policy 2015: Drawbacks

Question: New Urea Policy 2015 bears twin objectives: maximising urea production and promoting energy efficiency in urea units. However, it also has many drawbacks. Discuss.

About New Urea Policy 2015

• This policy outlines measures for increasing urea production by ensuring plants are energy efficient and gas pooling is supplied for urea facilities

• Cabinet has also approved fixed subsidy rates for fertilisers as part of this policy to help companies overcome liquidity problems

Drawbacks

• The comprehensive New Urea Policy 2015 is only an incremental change

• It boosts energy efficiency through economisation of rail freight and boosts domestic production only in marginal terms

• Instead, subsidies in agriculture should be rationalised and allocations for capital investment need to be stepped up

• Infrastructure is another area where the policy has not made significant impact; poor infrastructure is impacting capacity

• The fertiliser subsidy regime needs to be overhauled because price caps on urea are anachronistic

• Direct payment of nutrients subsidy would resolve the problem

• Urea price controls have wrong incentivised use of nitrogenous fertilisers and affected soil health in an adverse way

• Setting aside nearly 1% of the GDP for this, through this policy is not effective

• Such an incremental policy will lead to diminishing returns

• Urea production should be shored up in locations where feedstock is cheap such as Oman and Iran

• Biofertilisers and innovative seeds should be used, not chemical fertilisers

Facts and Stats

• Urea under government control is sold at highly subsidised rate of INR 5,360 per tonne

• Difference between MRP and cost of production is reimbursed to manufacturers by the Centre

• Centre has also attempted to boost domestic production of urea through JVs of two closed fertiliser plants in Talcher and Ramagundam

• India generates 22 MT of urea on an annual basis and imports 8 to 10 MT to meet complete demand of 30 to 32 MT.

• New policy is expected to generate investments of INR 35,000 crore for covering production shortfall