Matters Pertaining to Disinvestment of Fertiliser PSUs- A Review

Standing Committee Report Summary

• The Standing Committee on Chemicals and Fertilisers (Chair: Mr. Azad Kirti Jha) presented its report on ‘Matters pertaining to Disinvestment of Fertiliser PSUs- a review’ on August 20, 2025.  There are nine PSUs under the Department of Fertilisers.  Two of them, namely Hindustan Fertiliser Corporation Limited and Fertiliser Corporation of India Limited, are not operational.  As of 2025, PSUs contribute about 21% of urea and 11% of non-urea fertiliser production in the country.  Key observations and recommendations of the Committee include: 

• Time-bound process for disinvestments:  The Committee noted delay in executing Cabinet-approved disinvestments in PSUs.  For example, it noted delays of seven or more years in National Fertilisers Limited, Rashtriya Chemicals and Fertilisers Limited, and the Projects and Development India Limited.  The Committee observed that such delays can hamper the operations of PSUs and affect their financial stability.  It recommended that: (i) the Department of Investment and Public Asset Management and the Department of Fertilisers should work together to prepare and submit a disinvestment action plan with a defined timeline of six months to one year, and (ii) any disinvestment decision pending for more than two years must be mandatorily reviewed again by the Cabinet Committee on Economic Affairs.  The Cabinet Committee approves all divestment decisions regarding fertiliser PSUs.

• Assessment before disinvestment:  India relies heavily on imports for most of its fertiliser needs.  The imports range from 20% in Urea to 100% in Muriate of Potash.  The Committee noted that PSUs play a critical role in domestic fertiliser production and disinvestment of PSUs may affect self-reliance in the regard.  It recommended that before any divestment the Ministry of Chemicals and Fertilisers should: (i) study the expected gaps between fertiliser demand and supply over the next 10 years, and (ii) evaluate the strategic importance of each PSU.

• Financial condition of fertiliser PSUs:  The Committee noted that the interest due to the central government have grown larger than the original loan amount owed by several PSUs.  The Committee recommended the central government to: (i) convert high-interest loans into equity or interest-free loans, (ii) cancel unpaid interests that cannot realistically be repaid, (iii) replace high interest short-term loans with lower-interest long-terms loans, and (iv) help PSUs to raise funds from the market for modernisation and expansion.  It observed that these steps would also enable public financial institutions to extend better loan terms for PSUs.  It also noted that some PSUs have taken steps to improve their financial situation such as increasing production capacity and expanding their product range.  It observed that these efforts may require government support.

• Modernising infrastructure: Most of the fertiliser PSUs in India are over 25 years old, with seven of them being older than 50 years.  The Committee noted that older infrastructures are prone to frequent breakdowns, excessive energy consumption, and high maintenance costs.  It recommended that the central government should launch a scheme to provide monetary support to replace older facilities of PSUs with modern, energy efficient, and environmentally compliant facilities.  These investments may be financed through budgetary allocations, public private partnerships, and from PSU’s own profits.

• Product diversification:  The Committee noted that agricultural needs are rapidly shifting towards eco-friendly and crop specific nutrient solutions.  It recommended that PSUs should invest in research and development to develop climate resilient and nutrient efficient solutions.           

• Monetisation of underutilised assets:  The Committee noted that several fertiliser PSUs hold large tracts of strategically located lands.  These lands remain underutilised due to encroachments, legal disputes, or outdated land value estimates.  It recommended that the government should: (i) conduct a national audit of lands and assets held by all fertiliser PSUs, and (ii) lease unused assets to raise funds and cut costs.  Further, all PSUs should have an independent assessment of the commercial value of their land and built assets.