The government seeks investment of Rs 8,425 crore for new fertiliser plants

The national government is developing a Rs 8,425 crore viability gap funding (VGF) initiative to enhance domestic manufacturing and reduce urea, di-ammonium phosphate (DAP), and ammonia imports. This money will go to companies that build fertiliser factories that use "green" hydrogen and ammonia.

India imported 10 million metric tonnes (MMT) of urea, 5 million metric tonnes (MMT) of DAP, and 3 million metric tonnes (MMT) of ammonia in 2019-20, with an anticipated annual import value of $6 billion. The government believes that domestic supplies will replace imports, lowering costs and cutting foreign exchange outflow. Given that green hydrogen is produced entirely with renewable energy, such production will reduce carbon emissions.

According to sources, the government would initially consider using the VGF to subsidise the cost gap between domestically produced green hydrogen-based fertiliser and the benchmark price of imported fertiliser. As the cost of creating green hydrogen-based fertiliser decreases, the requirement for finance for plants built up later on is likely to decrease. To begin, the VGF mechanism will be used to cover two green urea facilities with a capacity of 1.3 MMT per annum each and two green DPA plants with a capacity of 0.3 MMT per annum.

Imports of urea increased to 9.82 million tonnes in 2020-21, up from 9.12 million tonnes the year before. According to the Fertiliser Association of India, the government's fertiliser subsidy is anticipated to reach an all-time high of approximately Rs 1.4 lakh crore this fiscal year due to high foreign pricing of crop nutrients such as urea and DAP.