Important Developments during 2000-2001

2.1 The production target for fertilizers for 2000-01 has been fixed at 112.14 lakh tonnes of nitrogen and 39.93 lakh tonnes of phosphate. This represents a growth rate of 3.0% in nitrogen and 1 7.5% in phosphate as compared to the actual production in 1999-2000. Production of nitrogenous and phosphatic fertilizers during April-Dec., 2000 was 83.87 lakh tonnes and 29.33 lakh tomes, respectively Taking 'N' & 'P' together, there was an overall growth of 4.8% over the production during the corresponding period of lost year. In respect of urea (which is a controlled fertilizer), the production has been 14994 lakh tones by the end of December 2000 which is 1.07% lower over the corresponding period in 1999-2000, After reassessment of urea capacity w.e.f 1 .4.2000, all the urea
manufacturers have been asked to restrict their urea production to 100% capacity utilization, keeping in view the urea requirement for the year 2000-01. The production of DAP has increased by 299% over the production made during the corresponding period of previous year.

2.2 At present 4 major fertilizer projects involving an estimated capital cost of approximately Rs. 2461 crore are under implementation in the country When commissioned, they are expected to add an additional capacity of 3.80 Iakh MTPA of urea, 3.20 lakh MTPA of NPK, 2176 lakh MTPA of DAP and 1 lakh MTPA of NP fertilizers.

2.3 Taking into account the fertilizer demand supply gaps in different regions of the country, the Government favoured a policy of near self-sufficiency in the production of urea, with limited dependence on imports and gave an 'in principle' approval to the following four projects for urea capacity creation (30.72 lakh TPA), in April 999 subject to investment appraisal of the projects by Public Investment Board (PIB):

i) Hazira Expansion Project of KRIBHCO at Hazira, Gujarat.
ii) Thai Expansion Project of RCE at Thai, Maharoshtra.
iii) Gorakhpur Project of KRIBHCO at the site ol FCIs old plant at Gorakhpur, UP.
iv) Nellore Grassroots Projects of IFFCO at Nellore, Andhra Pradesh.

Investment Appraisal of these projects has been carried out by PIB and confirmed in its meeting held on 9.7.99. In June 2000. the Government considered and deterred the proposal for taking a final decision on the projects.

2.4 A policy decision has been taken regarding creation of new urea capacities in the fertilizer sector. The country has achieved near self-sufficiency in production of urea. The Government have, therefore, decided not to encourage now urea capacity for production of urea in the country over and above those projects already posed for consideration as indicated above, This is on account of near self-sufficiency that has been achieved in production of urea and also the assessment of demand and supply scenario till the year 2003-04. This policy will be reviewed in April 2001 based on a fresh appriasal of the prevailing demand supply gap. By that time, a decision on the recommendations of the High Powered Committee on Fertilizer Pricing Policy would also be taken by the Government.

2.5 The initiatives undertaken to set up joint venture projects in countries with better resource endowments so as to meet the growing demand of fertilizers in the country hove made significant progress. The Government had approved the investment of RCF/KRIBHCO to make an equity contribution of US$80 million each in a joint venture
in Oman for production of 16.52 lakh tonnes of urea and 2.48 lakh tonnes of merchant ammonia per annum. The Joint Venture Company i.e. Oman India Fertilizer Company has been registered in Oman on 18.2.1998. The revised and restructured project has been approved by the Government in June 2000. The project will be completed within 35 months after the financial close.

2.6 The joint venture company of 'Industries Chemiques du Senegal' (lOS) which started production in 1984 has taken up a project for doubling the production of its phosphoric acid plants and development of new rock phosphates mines at a cost of about US$ 250 million. The Government have approved equity contribution of US $ 20 million by IFFCO in ICS Senegal for financing the expansion project The project is expected fo be completed by March 2001. lCS proposes to sell a major portion of the phosphoric acid produced at the expanded plant to India.

2.7 In order to evolve a strategy for use of Liquefied Natural Gas (LNG) as feedstock, the Government had set up a Core Group involving fertilizer companies with a view to explore the feasibility of developing a delivery system of LNG essentially to meet the demand of fertilizer units and projects. The Core Group submitted its report to the Government in March 1999. The report of the Core Group has been examined by the Government. Based on the preliminary examination of the report, Government has reactivated the Core Group of fertilizer companies on 26.52000 with direction to prepare a detailed feasibility report for setting up of an integrated chain of LNG supply in the country.

2.8 The Disinvestment Commission has classified the Fertilizer Sector as non-core on the basis of competitive market structure of fertilizer industry in India, which was delicensed in 1991 and has not displayed oligopohstic tendencies, Accordingly, it has recommended disinvestment of Government held equity in NFL, MEL, PPL, FACT, RCF and PPCL.

2.9 The Government have decided to disinvest 51% of its equity holding out of 97.65% in NFL; 32. 74% of its holding out of 58.74% in MEL; and 74% of its holding out of 100% in PPL in favour of strategic buyers along with transfer of management control, The decision on disinvestment in the case of FACT and PCF has been deferred, The disinvestment process in the case of NFL and MFL is in progress. 'Expression of Interest' from prospective bidders has been called. The process of selection of a Global Advisor/ Merchant Ranker is under way in the case of PPE, The restructuring proposal of PPCL based on the recommendations of the Disinvestment Commission is under process.

2.10 The revival package of HFC and FCI reformulated on The basis of a fresh technical appraisal by an Expert Group led by ICICI was considered by the Government on 1.10.97. The Government have approved the proposal for the revamp of Namrup units of HFC at an estimated fresh investment of Ps. 350 crore. The project is under implementation. To ensure timely implementation of the project a plan budgetary support of Rs. 70.00 crore has been made in the budget for 2000-200 1 . The rehabilitation proposals for the remaining units of F]FC & FCI, based on .init-wise viability, are under finalisation for seeking approval of the competent authority.

2.11 Under a scheme for decontrolled fertilizers, substantial special concession are also being provided on de-controlled phosphatic and potassic fertilizers primarily with a view to encouraging the farmers to optimise the use of the three plant nutrients, From 1.7.2000, the level of concession has been fixed at Ps. 3700 PMT for indigenous OAF Ps. 1350 PMT for imported D,AP and Ps, 3050 PMT for MOP The rate of concession on 8SF during 2000-01 from 17.2000 has been fixed at Rs. 700 PMT. The level of concession has been proportionately fixed for various fertilizers taking into account the NPI< content in these fertilizers.