Taking industrial liberalisation a step further, the government has approved a long-term urea policy, which says all new urea capacity in the country will use only natural gas/LNG as feedstock as against naphtha, furnace oil and LSHS in the past.
Natural gas/LNG is not only the cheapest feedtsock currently available, it is also less polluting.
The decision was taken at a meeting of the Cabinet Committee on Economic Affairs in New Delhi.
The CCEA also cleared a policy for conversion of existing urea plants using naphtha/FO/LSHS as feedstock into natural gas/LNG-based plants.
The government has thrown in financial incentives to aid urea producers to switch to natural gas/LNG. Thus, plants will be allowed to retain the saving on account of energy efficiency after conversion for a specified period.
Yesterday's decision was based on the recommendations of a group of ministers headed by Planning Commission Deputy Chairman KC Pant.
The fertiliser industry has been demanding a policy that will enable urea producers to switch to natural gas/LNG.
The new policy is expected to bring fresh investment into the sector, especially in view of the anticipated deficit of 4 million tonnes in the supply of urea by the end of the Eleventh Five Year Plan in 2011-12.
The Fertiliser Association of India has projected shortages will emerge by kharif 2004 and expand thereafter.
As this will improve the long-term viability of urea projects, financial institutions are now expected to be more open to exposure to such ventures.