National Investment Policy for Urea-2026

Context

The Union Cabinet’s approval of the National Investment Policy for Urea-2026 (NIPU-2026) is a crucial move towards bolstering the security of India’s fertiliser production and cutting reliance on urea imports.

Key Highlights

• Despite the presence of 33 urea manufacturing units in the country with an installed capacity of 269.42 lakh metric tonnes, India is continuing to import urea.
• Earlier, the New Investment Policy (NIP)-2012 provided a framework for revamp, expansion, revival, brownfield and greenfield urea projects.
• The investment window of NIP-2012 was closed in October 2019 with a fresh set of proposals for new urea plants and the government announced the introduction of NIPU-2026.
• The new policy is consistent with the goal of Atmanirbhar Bharat (self-reliant India) to be more self-reliant in the production of fertilisers.

Key features of National Investment Policy for Urea-2026

• In NIPU-2026, the focus will be on new urea manufacturing units using gas as raw material, which will promote new private and public investment in the urea manufacturing industry.
• The policy distinguishes between fixed costs and variable costs in the cost structure and gives increased clarity and predictability to investors.
• It brings a Return on Equity (RoE) range of 12% to 16% that will not only yield good returns for the investors but also be of benefit to the need of having a viable fertiliser industry.
• The policy also takes care of foreign exchange risk by fixing the foreign exchange value of the fixed costs for four years, depending on the exchange rate during this period.
• NIPU-2026 aims at bridging the gap between the urea demand and production capacity by encouraging new capacity.

Agricultural Urea vs Industrial Urea

• Agricultural urea is a nitrogenous fertilizer for crops that is heavily subsidized by the government.
• It is regulated under the Fertiliser Control Order (FCO) and is also mandatorily coated with neem, which helps to release nitrogen gradually and prevents fertiliser misuse.
• Urea is used in industrial or technical products such as resins, plywood adhesives, melamine, textiles, dyes and moulding compounds.
• Industrial urea is sold at market price without any fertiliser subsidy on industrial urea.
• Therefore, while they have the same chemical makeup, their use, oversight, pricing and distribution models are distinct.

Beyond Urea: Need for Balanced Fertilisation

• While the urea production boost can improve availability in NIPU-2026, it is not enough to address the fertiliser-related issues in agriculture in India.
• The Nitrogenous fertiliser dependency is a long-standing issue in India, especially urea, and there is an imbalance in the use of N, P & K fertilisers.
• Since 2010, the Nutrient Based Subsidy scheme was established to make phosphatic and potassic fertilisers affordable and to promote the balanced use of nutrients.
• Since 2015, the Soil Health Card Scheme has been introduced to allow farmers to gain insights into the nutrient status and physicochemical properties of their soil.
• In 2015, a mandatory 100% neem coating of urea was also put in place to limit nitrogen volatilisation and excessive use.
• Efficient management of nutrients can be further enhanced through the use of nano fertilisers in the field, precision agriculture, organic inputs and fertilisation according to the soil test.

Way ahead

• The government should make sure that NIPU-2026 lures investors without putting excessive fiscal pressure on the economy due to inefficient pricing mechanisms.
• The production of urea should be encouraged with the use of energy-efficient technology, energy supply security and modern urea plant facilities.
• The current policy of fertiliser needs to be progressively moved from the policy of urea towards soil-health and nutrient-management.
• Farmers will be encouraged to use balanced fertilisation through greater awareness and digital soil advisory services, which will be implemented with targeted subsidies.
• In conclusion, NIPU-2026 is a major effort in the direction of ensuring fertiliser security, but the sustainability of agriculture in India in the long-term will rely on the integration of domestic production, equitable fertilisation and efficient nutrient utilisation.

Source: The Indian Express

Prelims PYQ

Q. With reference to chemical fertilizers in India, consider the following statements: (2020)

1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.
2. Ammonia, which is an input of urea, is produced from natural gas.
3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3

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