The Cabinet is making headlines with the approval of an exclusive subsidy policy for urea produced through coal gasification by Talcher Fertilizers Limited (TFL). Urea is a fertilizer that is widely used throughout India.
The TFL Urea Project: Capacity and Location
The project is being led by TFL, a Joint-Venture Company of four Public Sector Undertakings (PSUs) including Rashtriya Chemicals & Fertilizers (RCF), GAIL (India) Ltd. (GAIL), Coal India Ltd. (CIL), and Fertilizer Corporation of India Ltd. (FCIL). The 1.27 million tonne per annum capacity urea plant is being set up in Odisha. The groundwork for this project is being laid with an expected investment of Rs. 13,277 crore.
This will be a unique venture as it represents the only plant to produce urea, a nitrogenous soil nutrient, through the process of coal gasification.
Prospective Benefits of the Project
The project anticipates numerous advantages, primarily an increase in the availability of fertilizer for farmers, which will boost development in the eastern region. Moreover, it will save transport subsidy for the supply of urea in the eastern part of India.
The project expects a reduction in urea imports by 12.7 Lakh Metric Tonnes (LMT) per annum which would lead to a considerable saving in foreign exchange. This aligns with the ‘Make in India’ initiative and ‘Atmanirbhar Bharat’ campaign, aiming to strengthen domestic industrial growth.
The project also promises to enhance local infrastructure such as roads and railways, and provide new business opportunities in terms of ancillary industries within the catchment area of the project.
Understanding Coal Gasification
Coal gasification is a process that converts coal into synthesis gas or ‘syngas’, a mixture of hydrogen, carbon monoxide and carbon dioxide. The resulting syngas has various uses including electricity production and the making of chemical products like fertilizers.
The hydrogen derived from coal gasification can be utilized in a variety of ways such as creating ammonia, and powering a potential hydrogen economy. This ammonia then reacts with carbon dioxide to produce urea melt.
India’s Goal for Coal Gasification
India aims to gasify 100 million tonnes of coal by 2030 under four major projects with a cumulative investment of Rs. 20,000 crore.
Fertilizer Consumption in India
India’s fertilizer consumption in FY20 was about 61 million tonnes, of which 55% was urea. Consumption is predicted to have increased by an additional 5 million tonnes in FY21. Given the higher costs of non-urea varieties (MoP, DAP, complex), many farmers choose to use more urea than required.
Government Measures for Urea Consumption
To manage urea consumption, the government has introduced a number of measures. One of it involves coating urea with neem to prevent illegal diversion of urea for non-agricultural uses. Additionally, the government has also stepped up the promotion of organic and zero-budget farming.
Subsidy on Urea
The Central Government provides subsidies on urea to fertilizer manufacturers based on each plant’s production costs. These units are then required to sell the fertilizers at a Maximum Retail Price (MRP) set by the government.
Subsidy on Non-Urea Fertilisers
Non-urea fertilizers, examples of which include Di-Ammonium Phosphate (DAP), Muriate of Potash (MOP), have their MRPs either decontrolled or set by the companies. However, the Central Government pays a flat per-tonne subsidy on these nutrients to ensure they’re priced reasonably.