EXCLUSIVE: Govt proposes Rs 8,425 cr funding for new fertiliser plants

The central government is planning a Rs 8,425 crore viability gap funding (VGF) scheme for boosting domestic manufacturing and reducing the import of fertilisers like urea, di-ammonium phosphate (DAP) and ammonia. This funding will be provided to companies who set up fertiliser plants using ‘green’ hydrogen and ammonia.
 
In 2019-20, India imported 10 million metric tonne (MMT) of urea, 5 MMT of DAP and 3 MMT of ammonia at an estimated annual import value of $6 billion. The government hopes that imports will be substituted by domestic supplies, reducing costs and outflow of foreign exchange. Given that green hydrogen is generated entirely by means of using renewable energy, such manufacturing will also lower carbon emissions.
 
Sources added that in the initial stage, the government will look at supporting the cost difference between domestically made green hydrogen based fertiliser and benchmark price of imported fertiliser through the VGF. The need for funding is expected to taper off for plants set up later on as the cost of producing green hydrogen based fertiliser comes down. To begin with, the proposal is to cover two green urea plants of 1.3 MMT per annum capacity each and two green DPA plants of 0.3 MMT per annum capacity under the VGF mechanism.
 
Urea imports rose to 9.82 million tonnes in 2020-21, up from 9.12 million tonnes in the previous year. The government's fertiliser subsidy is likely to rise to an all-time high of around Rs 1.4 lakh crore during this fiscal year on high international prices of crop nutrients including urea and DAP, according to the Fertiliser Association of India.

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