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Subsidy Policy for Urea Produced from Coal Gasification

  • 22 Apr 2021
  • 4 min read

Why in News

The Cabinet has approved an exclusive subsidy policy for urea produced through coal gasification by Talcher Fertilizers Limited (TFL).

  • Urea is a widely used fertiliser in India.

Key Points

  • About the TFL Urea Project:
    • Capacity and Location: TFL is setting up the 1.27 million tonne per annum capacity urea plant based on coal gasification technology in Odisha with an estimated investment of Rs. 13,277 crore.
      • This will be the only plant to produce the nitrogenous soil nutrient (urea) through coal gasification route.
      • Talcher Fertilizers Ltd. (TFL) is a Joint Venture Company of four PSUs (Public Sector Undertakings) namely Rashtriya Chemicals & Fertilizers (RCF), GAIL (India) Ltd. (GAIL), Coal India Ltd. (CIL) and Fertilizer Corporation of India Ltd. (FCIL).
    • Expected Benefits:
      • The project will improve availability of fertilizer to farmers thereby boosting development of eastern region and will save transport subsidy for supply of urea in eastern part of the country.
      • It would assist in reducing Urea imports to the tune of 12.7 LMT (Lakh Metric Tonnes) per annum leading to savings in foreign exchange.
      • It will also give a boost to the 'Make in India' initiative and ‘Atmanirbhar Bharat’ campaign and would help development of infrastructure like roads, railways etc.
      • It will also provide new business opportunities in the form of ancillary industries in the catchment area of the project.
  • Coal Gasification:
    • Coal gasification is the process of converting coal into synthesis gas (also called syngas), which is a mixture of hydrogen (H2), carbon monoxide (CO) and carbon dioxide (CO2).
      • The syngas can be used in a variety of applications such as in the production of electricity and making chemical products, such as fertilisers.
      • The hydrogen obtained from coal gasification can be used for various purposes such as making ammonia, powering a hydrogen economy.
    • The ammonia is reacted with the carbon dioxide to produce urea melt.
    • In-situ gasification of coal–or Underground Coal Gasification (UCG)–is the technique of converting coal into gas while it is still in the seam and then extracting it through wells.
    • India has set the target that by 2030 it will gasify 100 million tonne of coal under four major projects with an overall investment of Rs. 20,000 crore.
  • Fertilizer Consumption in India:
    • India’s fertiliser consumption in FY20 was about 61 million tonne — of which 55% was urea—and is estimated to have increased by 5 million tonne in FY21.
      • Since non-urea (MoP, DAP, complex) varieties cost higher, many farmers prefer to use more urea than actually needed.
      • The government has taken a number of measures to reduce urea consumption. It introduced neem-coated urea to reduce illegal diversion of urea for non-agricultural uses. It also stepped up the promotion of organic and zero-budget farming.
    • Subsidy on Urea: The Centre pays subsidy on urea to fertiliser manufacturers on the basis of cost of production at each plant and the units are required to sell the fertiliser at the government-set Maximum Retail Price (MRP).
    • Subsidy on Non-Urea Fertilisers: The MRPs of non-urea fertilisers are decontrolled or fixed by the companies. The Centre, however, pays a flat per-tonne subsidy on these nutrients to ensure they are priced at “reasonable levels”.
      • Examples of non-urea fertilisers: Di-Ammonium Phosphate (DAP), Muriate of Potash (MOP)

Source: PIB

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