SYLLABUS

GS-3: Issues related to Direct and Indirect Farm Subsidies; Issues of Buffer Stocks and Food Security.

Context: The Cabinet Committee on Economic Affairs (CCEA) has approved the National Investment Policy for Urea-2026 (NIPU-2026) to encourage investment in gas-based urea manufacturing units and strengthen India's self-reliance in urea production under Atmanirbhar Bharat.

About the National Investment Policy for Urea-2026 (NIPU-2026)

• Nodal Department: Department of Fertilizers, Ministry of Chemicals and Fertilizers. 

• Objective: Promote fresh investment in gas-based urea manufacturing units to increase indigenous urea production and reduce import dependence. 

• Coverage: All new gas-based urea manufacturing projects under the policy. 

• Applicability: Uniform incentives for public sector, private sector and cooperative sector projects. 

• Reason for the Policy: Introduced after the investment window under New Investment Policy (NIP)-2012 expired in October 2019, while new proposals for urea plants continued to be received. 

• Key Features:

• Separate treatment of fixed and variable costs for greater transparency in pricing. 
• Return on Equity (RoE) band introduced with Minimum (12%) and Maximum (16%).
• Foreign exchange risk mitigation by converting fixed costs into Indian Rupees after four years based on prevailing exchange rates. 
• Expected to generate savings of over ₹250 crore per plant compared with projects established under NIP-2012. 

• Targets under NIPU-2026:

• Encourage establishment of 8–9 new gas-based urea plants. 
• Create an additional production capacity of about 10 million tonnes annually. 
• Achieve self-sufficiency in urea production and substantially reduce or eliminate imports. 

• Expected Outcomes:

• Narrow the gap between domestic demand and indigenous production. 
• Improve transparency and financial viability of new urea projects. 
• Save foreign exchange by reducing fertilizer imports. 
• Ensure a stable and reliable supply of urea for Indian agriculture. 
• Strengthen India's fertilizer security under Atmanirbhar Bharat.

Significance

• Strengthens Fertilizer Security: Expands domestic urea production, reducing dependence on imports and ensuring a more reliable supply of a critical agricultural input. 

• Advances Atmanirbhar Bharat: Promotes indigenous manufacturing capacity, making India progressively self-reliant in urea production. 

• Catalyses Private and Public Investment: Introduces a transparent and predictable incentive framework that encourages investment by public, private and cooperative sectors in gas-based urea plants. 

• Improves Fiscal Efficiency: The revised pricing framework and policy design are expected to reduce project costs, generating savings of over ₹250 crore per plant compared with NIP-2012. 

• Reduces Import Dependence and Saves Foreign Exchange: Higher indigenous production lowers urea imports, reducing exposure to global market uncertainties and conserving valuable foreign exchange. 

• Promotes Industrial Growth and Employment: Establishment of new urea plants will stimulate industrial activity, strengthen the domestic fertilizer manufacturing ecosystem and generate direct and indirect employment.