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CCEA Likely To Take Up New Urea Investment Policy Soon

The Cabinet Committee on Economic Affairs or CCEA is likely to take up the new investment policy for urea soon not only to ensure at least 12 percent return on equity but also to reduce the subsidy on urea, reports said..

The Finance Minister in his Budget speech said, "To reduce India's import dependence in urea, the Indian government took steps to finalize pricing and investment policies for urea. It is expected that with the implementation of the investment policy, the country will become self sufficient in manufacturing urea in the next five years."

The draft note for the CCEA is being redrafted and will be sent to for inter-ministerial consultation and finally to the Cabinet Committee for final decision, sources said. Since the Budget gave some concessions on machinery, the original draft note required redrafting.

A Group of Ministers (GoM) discussed the draft policy before the Budget. It is believed to have endorsed the Saumitra Chaudhuri Committee's views on the investment policy, but with some modifications. This committee favoured minimum return of equity at 12 percent.

However, a senior Government official said that going by the current rate of delivered gas (not from KG D6), it would be difficult to provide 12 percent minimum return on equity, unless the government ensures adequate quantity of domestic gas or gives greater protection on account of gas cost.

Even the Chaudhuri Committee opined that the delivered gas price be maintained within the band of $6.5-$14/mmbtu.

However, the real problem is with the price of regassified liquefied natural gas (RLNG) which is hovering around $16-17/mmbtu, while gas is supplied at $4.88/mmbtu (administered prices plus taxes) from KG D6, the official said.

The committee had also recommended that in terms of the gas utilization policy, any additional gas from domestic sources will necessarily have to be considered to meet the demand of fertilizer sector.

While allocating any quantity of RLNG to these units, the Petroleum Ministry would ensure gas swapping from RLNG to any future discovery of domestic gas, it added.

by RTT Staff Writer

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