The decision to put off the plans is in view of the unfavourable administered pricing regime for urea, company sources told PTI.

Tatachem had already arranged the required resources for the project. These funds would now be diverted to other activities, including the modernisation of the company's Mithapur soda ash plant.

Even after being operational for four years, Tatachem is still selling urea at a provisional price and final price is yet to be fixed.

With the current high level of subsidisation on the fertiliser for farmers, manufacturers do not get reasonable margins, making it unviable for the company to implement such a large capital investment, they said.

The current 7,50,000 tpa capacity of the Babrala unit was commissioned in December 1994, at a capital expenditure of Rs 1,400crore. The unit manufactures ammonia and urea. The proposed expansion of the unit was to have a gestation period of over three years.

Urea comes under the Essential Commodities Act and its pricing, despatch and distribution are determined by the government. There are no plans as of now to take up the expansion project in the near future, the sources said, adding the company would wait for a more favourable pricing environment to emerge.

The company has made a representation to the government on the matter but is yet to get a reply, they said. For urea, the main markets are Uttar Pradesh, Punjab and Haryana.

Tatachem operates a 1.6 million tpa soda ash plant at Mithapur in Gujarat. The company is the market leader in soda ash with a 43 per cent market share, the sources said. It has salt and limestone mines in Mithapur and operates a 4,00,000 tpa cement plant there.

Tatachem has embarked upon a Rs 500 crore modernisation programme at the Mithapur chemical complex. The programme has been going on forabout two years now, the sources said.

The total expenditure and commitment to this project in financial year 1997-98 amounted to Rs 189 crore, the sources said, adding the figure for 1998-99 was not available. They said the company was likely to commit around Rs 200 crore for the modernisation programme in the running fiscal.