The government seems to have dusted up a decades-old move to revive eight closed fertiliser units, with the fertiliser ministry preparing a note on the subject for the cabinet committee on economic affairs (CCEA).

Five of these units at Sindhri, Ramagundam, Talcher, Korba and Gorakhpur are owned by Fertiliser Corporation of India, while the remaining three at Barauni, Durgapur and Haldia are owned Hindustan Fertiliser Corporation.

Union minister for chemicals and fertilisers MK Alagiri has sent the final proposal to CCEA for its nod, a government official privy to the development said. The proposal envisaged that two units at Sindhri and Talcher would be given on nomination basis to listed state-owned companies, SAIL and RCF, respectively. Other units would go through a bidding process for a public-private partnership.

The revival plan would make it mandatory for each unit to produce at least 1.5 million tonnes of urea annually. In addition, the extra land with these production units may be utilised for setting up non-fertiliser manufacturing projects, the official said.

SAIL has placed expression of interest to set up a steel plant at Sindhri on the surplus land apart from manufacturing the mandatory 1.5 million tonnes of urea.

Alagiri has also proposed to the planning commission a new investment plan for greenfield fertiliser units, including measures to attract foreign direct investment that has not been forthcoming so far. As per the proposal, fertiliser pricing will be market determined unlike the arrangement for existing plants where it is regulated. The government is in the process of evolving a new fertiliser policy that would look at decontrolling urea prices for existing plants in a phased manner.

Freeing urea prices has hit a deadlock with fertiliser, commerce and petroleum ministries wanting the existing arrangement to continue for all 29 fertiliser units in view of the heterogeneity of the production process resulting in huge variation in cost of production.

But, the planning commission and the finance ministry have been pushing for including urea under the nutrient-based subsidy regime with a minimum floor price of Rs 4,000 per tonne. The 29 urea-producing units have been categorised into six groups based on their feedstock – natural gas, naphtha, low sulphur and high sulphur, among others.

Gas-based fertiliser units have an advantage with the cost of feedstock; domestic natural gas being cheap at around $4.20 per mBtu. The four old naphtha-based fertiliser units (in Mangalore, Kochi, Chennai and Tuticorin) were at a disadvantage with the naphtha feedstock being the most expensive. This results in huge variations in the price of urea from Rs 6,000 per tonne to Rs 33,000, the official said.

“Earlier, the ministry of petroleum had assured that all existing fertiliser units would be supplied natural gas by 2014, which would help them to shift to gas as feedstock. But, due to lower output of domestic gas, all units cannot shift to natural gas as feedstock by 2014. In such a situation, decontrolling urea price is not feasible,” said the official.