Fertilizer ministry to revive sick units under PPP

Altering its plans a bit to revive the sick fertiliser units, the government is likely to lease six sick units on a public private partnership (PPP) basis and has decided not to dispose off these units through an outright sale was decided earlier. In this wake, the department of fertilizer has charted out plans to invite bids for the revival of these plants in November and has sought the Cabinet approval to start the process. The fertilizer ministry has been examining the option of a direct equity sale. However, it decided for a PPP model because of its flexibility in revenue sharing opportunities.

The ministry said that while an outright sale of equity would mean the government will have to wait for the plants to make profits to get a share of revenue, the PPP mode would enable the government to do so in the first year itself.

According to a Cabinet decision in 2007 to revive eight plants owned by the Fertiliser Corporation of India and Hindustan Fertiliser Corporation, each of these has the capacity to produce about 1.15 million tonne of urea a year and their revival is expected to require investment of Rs 4,500 crore each.

In its revival step, the department is expected to invite bids for six plants initially. The PPP mode will give the government an upfront amount to be paid by private bidders, along with a revenue share over the lease. Yet, the concession period has not been finalized but it is believed that 90 years of the period may be allowed.