EXCLUSIVE: Government offers funding of Rs 8,425 cr for new fertilizer plants

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The central government is planning a Rs 8,425 crore Sustainability Gap (VGF) program to boost domestic manufacturing and reduce the import of fertilizers like urea, ammonium phosphate (DAP) and ammonia. This funding will be given to companies that set up fertilizer plants using “green” hydrogen and ammonia.

In 2019-2020, India imported 10 million metric tonnes (MMT) of urea, 5 MMT of DAP and 3 MMT of ammonia for an estimated annual import value of $ 6 billion. The government hopes that imports will be replaced by domestic supplies, which will reduce costs and foreign exchange outflows. Since green hydrogen is entirely generated using renewable energy, such manufacturing will also reduce carbon emissions.

Sources added that in the initial phase, the government will seek to compensate for the difference in cost between the green hydrogen fertilizers produced in the country and the benchmark price of fertilizers imported through the VGF. The need for financing is expected to decrease for plants set up later as the cost of producing hydrogen-based green manure declines. To begin with, the proposal aims to cover two green urea plants with a capacity of 1.3 MMT per year each and two green DPA plants with a capacity of 0.3 MMT per year under the VGF mechanism.

Urea imports reached 9.82 million tonnes in 2020-21, compared to 9.12 million tonnes the previous year. According to the Fertilizer Association of India, the government subsidy for fertilizers is expected to reach an all-time high of around Rs 1.4 lakh crore in this fiscal year due to high international prices of crop nutrients including urea and sugar. DAP.

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