The Cabinet Committee on Economic Affairs on Tuesday approved the supply of gas at uniform delivered price through a pooling mechanism for 30 urea manufacturing units in the country.
Calling it "a historic moment for farmers", Communications Minister Ravi Shankar Prasad announced the decision which would allow sale of gas at a composite price arrived at by pooling gas from cheaper domestic and more expensive imported sources.
"It is expected that the cost of production of urea at pooled price would be less than the price of imported urea, which will encourage the existing urea units to produce beyond their reassessed capacity," a cabinet communique said.
Prasad told reporters that this "will reduce import dependence and result in saving of Rs.1550 crore of subsidy".
According to the government, the move is expected to help in reviving the Gorakhpur, Barauni and Sindri urea plants.
"The need for this intervention arose because, at present, the price of gas supplied to fertilizer units varies from plant to plant depending upon the combination of domestic gas and Regasified Liquefied Natural Gas (RLNG). Hence, there is no uniformity in input price," the cabinet statement added.