• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Harish Damodaran

NEW DELHI, March 27

IN a further blow to the domestic urea industry, the Group of Ministers (GoM), set up to formulate policy parameters and norms for determining retention prices of individual units, has recommended scrapping of the five per cent `vintage allowance' given to plants that are over 10 years old during the seventh pricing period, extending from July 1, 1997 to March 31, 2000.

The move is expected to result in the industry returning around Rs 2,000 crore to the Government as past overdrawn subsidy amount.

Currently, under the retention price-cum-subsidy scheme (RPS), urea units are paid on a per-tonne basis with reference to a normative `achievable' level of production, which, in turn, is reckoned at 90 per cent of their capacities for the gas-based plants and 85 per cent for the naphtha/fuel oil- based plants.

But, in case of plants that are more than 10 years old, the normative utilisation is fixed at 85 per cent for the gas-based units and 80 per cent for the naphtha/fuel oil-based units. For capacity utilisation in excess of these normative levels, the units are entitled to an extra recovery of capital-related charges.

While the Department of Fertilisers had suggested that the withdrawal of the allowance — which provides for a 5 per cent discount in capacity utilisation and feedstock consumptions norms for old plants — be undertaken only during the eighth pricing period (April 1, 2000 to March 31, 2003), the GoM at its meeting today is, however, understood to have proposed the phasing out to be effected over the seventh pricing period itself. In other words, from April 1, 2000 (the start of the eighth pricing period), the old plants would be treated on par with the new ones.

Feedstock consumption norms: The GoM has also proposed that the feedstock consumption norms for the seventh pricing period for each year must be determined on the basis of the actual levels achieved for the same or the previous year, whichever is lower.

Send this article to Friends by E-Mail

Stories in this Section
Saldanha quits as Haldia Petro MD

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line