The government has announced the setting up of a urea plant of 1.27 million tonnes annual capacity at Namrup, Assam to further augment the fertiliser’s supply. This will be the third plant at Namrup as there are already two plants with smaller capacity operational under the public sector Brahmaputra Valley Fertilizers Corporation Ltd (BVFCL).

The proposal for a new urea plant was pending for quite some time and the Budget announcement paved its way for faster implementation. The plan was first mooted in 2015 when the Centre approved a new brown field ammonia-urea complex (Namrup-IV Project) in the premises of BVFCL with an annual capacity of 0.86 mt under public private partnership mode (PPP). However, the plan was shelved after no proposal was received in the competitive bidding, through which the government wanted to offer 52 per cent equity to the joint venture partner.

The proposed gas based ammonia-urea plant (as announced in Budget) will be set up by a JV of Central PSUs, and the Assam government. While public sector Rashtriya Chemicals & Fertilizers (RCF), will have 52 per cent equity, Oil India (PIL) will have 26 per cent share and both BVFCL and the Assam government will have 11 per cent, each.

Dormant plants

In her Budget speech, Finance Minister Nirmala Sitharaman said, “For Atmanirbharta in urea production, our government had reopened three dormant urea plants in the eastern region. To further augment urea supply, a plant with annual capacity of 12.7 lakh tonnes will be set up at Namrup, Assam.” India has total 36 gas-based urea manufacturing units with an installed annual capacity of 28.37 mt whereas the annual import was 7.04 mt in FY 2023-24.

BVFCL was incorporated in 2002 after segregation of Namrup units from Hindustan Fertilizer Corporation Ltd (HFCL).

Another announcement in the Budget was import duty reduction in phosphoric acid from 20 per cent to 7.5 per cent with effect from February 1.

Industry sources said over all dependence on DAP import (including import of phosphoric acid as raw material for domestic production) is about 80 per cent and as global rates have increased recently, it was logical to expect a cut in customs duty. Out of total DAP sales of 8.62 mt during April-December of current fiscal, the share of import was 4.08 mt (over 47 per cent).

Meanwhile, the Budgetary allocation for the fertiliser subsidy – urea, phosphorus (P) and potash (K) -- has been marginally increased to ₹1.68 lakh crore for FY26 from ₹1.64 lakh crore in FY25 (Budget Estimate). It included ₹1.19 lakh crore for urea, same as in current year, and ₹49,000 crore for P & K.

However, the government has provided ₹11,600 crore additional subsidy in revised estimate for FY25 to the fertilizer companies from the Oil Industry Development Fund (OIDF), which the fertilizer industry officials said may be due to accounting purpose as the government has been paying subsidy, unlike earlier years when it was accumulating.

“The additional subsidy announced by the government due to hike in global phosphoric/DAP prices have not been totally paid from the Budgetary allocation as only about ₹7,000 crore has been increased in the revised estimate,” an industry source said. It is high time that the overall cut in fertiliser subsidy as mentioned should be adhered to by allowing some increase in urea prices.

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