India reassesses incentives for new nitrogen capacity

Successive Indian administrations have sought to address India’s import requirement for urea, with demand far outstripping domestic supply. Latest news in the Indian media suggest that the Government’s New Investment Policy, intended to incentivise manufacturers to raise domestic production, has attracted far too much interest.

The NIP sought to introduce guaranteed buy-back of urea produced for up to eight years from new capacity. The introduction of the policy saw numerous capacity proposals brought forward with the Indian Business Standard reporting that up to 16m. tonnes of capacity have been proposed. This against a current import requirement of 8m. tonnes of urea.

The latest reports speculate that the Government may redefine the NIP by introducing a bidding process to identify the producers eligible, or by only backing the lowest cost producers.

UPDATE: The Cabinet Committee on Economic Affairs is reported to have not considered the proposal at its recent meeting. The Economic Times reports that the proposal was dropped at the last minute from the meeting as the Planning Commission has requested for more time to assess the changes.

Earlier coverage from the Business Standard is available here with follow up from the Economic Times here.

The changing Indian demand and supply landscape is assessed in Profercy’s latest long-term outlook, The Urea Market to 2030. For more information, please click here.