The revision in energy norms is likely to impact the profitability of urea players to some extent as energy savings, profits and cash generation will come down, Icra Ratings said in a report.
“The revision in the energy norms was impending from April 1, however due to the COVID lockdown-led delays in the implementation of energy savings projects by the industry, the deadline has been extended. With the revision in the energy norms, the profitability of urea players will moderate to some extent, given that the energy savings post revision of norms will be lower for most of the players vis-a-vis pre -revision levels,” Icra Group Head and Senior Vice-President K Ravichandran said.
Several players expected some relief in the implementation of energy norms through extension of current energy norms for another couple of years, however, as per the notification, the government’s intent appears clear in terms of the revision in the energy norms in order to save subsidy payouts, he added.
The government in a notification in March 2020, had notified the revised fixed costs for urea units with an incremental fixed cost of Rs 350 per tonne for all urea units and an additional Rs 150 per tonne for urea units that converted from naphtha to natural gas and are more than 30 years old.