The new pricing
policy for urea manufacturing units will come into effect
from April 1st , 2003. The main objective of the
new policy is to bring in greater transparency, uniformity and
efficiency in subsidy payments to urea companies and to encourage
them to take measures on their own to promote efficiency and
bring down the cost of production. The new policy is likely
to result not only in savings in the subsidy expenditure but
would also promote the efficient use of scarce energy resources.
This was stated by the Minister of Statae for Chemicals and
Fertilizers Dr. Chhattrapal Singh while addressing the meeting
of the Parliamentary Consultative Committee here today.
Dr. Singh informed
the members that the new scheme will be implemented in stages.
Stage I would be of one year duration, from April 1st
, 2003 to March 31st 2004. Stage II would be of
two years duration, from April 1st ,
2004 to March 31st , 2006. The modalities of Stage
III would be decided after review of the implementation of
the two earlier stages.
Elaborating on
the salient features of the new pricing policy Dr. Singh said
there will be six groups based on vintage and feedstock for
determining the group based concession under the new scheme,
namely, pre 1992 gas based units, post 1992 gas based units,
pre 1992 naphtha based units, post- 1992 naphtha based units,
fuel oil/ low sulphur heavy stock (FO/LSHS) based units and
mixed energy based units. The mixed energy based group shall
include such gas-based units that use alternative feedstock/fuel
to the extent of more than 25 per cent as admissible on April
1st , 2002. Classification of units among different
group so determined shall not be changed during stages - I and
II.
The Minister
said that rates of concession for the units in each group will
be determined in two steps. In Step-I, the weighted average
retention price and dealers margin of the units in the respective
group as applicable on 1.4.2002 would be computed. Units having
exceptionally high or low retention price, i.e. deviation of
20 per cent and above with reference to group average computed
in Step-1 are to be treated as outliers in their respective
groups. In Step-2, the final weighted average group retention
price after excluding the outliers will be computed.
The members
were informed that under the new policy the units in each group
would receive the concession after adjustment on account of
escalation/de-escalation in the variable cost related to changes
in the price of feedstock, fuel, purchased power and water.
The modalities for this purpose will be worked out by the Department
for Stage-I and Stage-II on the basis of group energy data and
efficient consumption patterns of the units keeping in view
the data of 8th pricing period. Those units which
have lower retention price than the weighted group average (estimated
after excluding the outliers as final group retention price)
are to get the concession as per their individual retention
price. The remaining units (excluding outliers) are to get the
concession based upon the weighted group average retention price
computed after excluding the outliers. This basis would be valid
for State-II also.
Shri Dhindsa
said that after commencement of Stage-I and also beyond Stage-II
there shall neither be any reimbursement of the investment made
by a unit for improvement in operations nor any mopping up of
gains of the units as a result of operational efficiency. The
parameters outlined in the new scheme shall be the inputs for
computation of concession. The outliers having a retention price
higher that 20 per cent or more from the group average in their
respective group would be granted an adjustment phase of one
year, i.e. Stage-I. During State-I, such outliers will get a
rate of concession based upon the group weighted average (after
excluding outliers) and a structural adjustment which will be
50 per cent of the difference between their respective retention
price and the group average.
The Committee
Members were informed that during Stage-II there will be no
special treatment for the outliers and all the units will get
the group rate of concession as outlined earlier for Stage-I.
The units having lower retention price than the group average
shall continue to get the retention price as per their individual
retention price. The six groups would remain as in Stage-I.
The concession rates shall be adjusted for reduction in capital
related charges. Further, the group energy norms would be enforced
on efficiency considerations. The Department of Fertilizers
would take into consideration the recommendations of the Gokak
Committee in determining the group energy norms. The scale of
reduction on account of capital related charges (CRC) would
also be finalized by the Department of Fertilizers. Thus, the
adjustments on account of CRC and group energy norms effective
in Stage-II would be made known to the units so that they have
reasonable time for making necessary technological and other
structural adjustments.
The Minister
said that under the new Scheme, there will be no capping on
production of urea. The use or sale of by-products such as ammonia,
CO2 etc. will be permitted in case considered surplus beyond
the reassessed capacity for urea production. The final concession
would be determined and disbursed only on the reassessed installed
capacity unless additional production is mopped up under the
ECA allocation. The feedstock/fuel ratio for the entire production
would be taken into consideration for assessing the concession
up to installed reassessed capacity.
The following
members attended the meeting: Shri Baju Ban Riyan (Lok Sabha),
Shri Manoj Bhattacharya and Prof. Alka Balram Kshatriya (Rajya
Sabha).
