Cabinet Approves New Urea Policy to Boost Domestic Production by 10 Million Tonnes
The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a new National Investment Policy for Urea (NIPU-2026) aimed at making India self-reliant in the production of the widely used fertiliser. The policy will facilitate the setting up of eight to nine new gas-based plants with a combined capacity of 10 million tonnes per year.
Briefing reporters after the Cabinet meeting, Information and Broadcasting Minister Ashwini Vaishnaw said that urea demand is growing at an annual rate of 5 per cent due to changes in cropping patterns, increased sowing area, and record agricultural production. The new policy is designed to bridge the gap between domestic production and demand, which currently stands at about 30 million tonnes and 40 million tonnes respectively. India imports around 10 million tonnes of urea annually to meet the shortfall.
The NIPU-2026 is an extension of the 2012 New Investment Policy (NIP) with key revisions. Major changes include the separation of fixed and variable costs for greater transparency, introduction of a viable return on equity (RoE) band with a floor of 12 per cent and a ceiling of 16 per cent, and mitigation of foreign exchange risk through conversion of fixed costs into rupees after four years based on prevailing exchange rates. According to a statement from the Ministry of Chemicals and Fertilizers, these measures are expected to result in savings of over ₹250 crore for each plant established under the new policy compared to the 2012 framework.
The incentive structure under NIPU-2026 will be uniform for private, government, and cooperative sector projects. The policy comes in response to several proposals received by the Fertilizers Ministry for setting up new urea units. Under the 2012 NIP, which expired in October 2019, six new urea plants were set up—four through joint ventures of nominated public sector undertakings and two by private companies. Currently, there are 33 operational urea manufacturing units with a total reassessed or installed capacity of 26.94 million tonnes.
The government aims to achieve complete self-reliance in urea production through the new policy, reducing the country's dependence on imports from West Asia and other regions.
