India's Cabinet on Friday approved a new policy for urea fertiliser makers aimed at boosting investment in the sector and helping reduce government's subsidies, a cabinet minister said.
Kapil Sibal said the new rules would promote joint ventures abroad, which in turn will help meet India's domestic demand through imports at competitive prices.
According to the new investment policy, additional urea from the revamp of existing units will be recognised at 85 per cent import parity price with the floor and ceiling price of $250 and $425 per tonne respectively, a government statement said.
The urea from the expansion of existing units would be recognised at 90 per cent of import parity price with a floor price of $250 per tonne, it said.
The new policy also provides that coal gassification-based urea projects will be treated at par with other new and existing plants, which will encourage use of local coal.
Shares of major fertilser producers such as Tata Chemicals, Nagarjuna Fertilizers and Chambal Fertilisers were trading 2-5 per cent higher on hopes of better margins after the government pushed up the floor price. Analysts also expected fresh investments to be announced because of linkage to import parity pricing.