What is in news : The Union government  extended the subsidy benefits under the amended New Investment Policy 2012 to Ramagundam Fertilisers and Chemicals Ltd (RFCL), located in Telangana.

NEW INVESTMENT POLICY FOR UREA 2012

• The Government had announced New Investment Policy (NIP) – 2012 on 2nd January, 2013 and its amendment on 7th October, 2014
• The commercial production of CFCL-III started on 1st January, 2019.

New urea policy:

• It aims to entice fresh investment of about Rs.35,000 crore to boost domestic production by 8 million tonnes.
• 12-20 % post-tax return will be given by the government on fresh capital infused by the manufacturers for establishing new plants as well as for expansion and refurbishment of the existing ones.
• To ensure this return, the government would cover the entire cost of natural gas, which is the main feedstock of urea, and accounts for 80 % of the cost.
• Urea sector is controlled by the government and it has fixed the maximum retail price (MRP) at Rs.5,360 a tonne.
• The difference between the MRP and the cost of production is given as subsidy to manufacturers.
• The government has set a floor and ceiling price of urea, based on the price of natural gas plus 12-20 per cent equity returns in order to determine the cost of production of new plants to be established after the policy comes into effect.