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Fertilizer industry pitches for direct transfer of urea subsidy to farmers

05 Jan 2016 Evaluate

The fertilizer industry in a pre-budget meeting with Finance Minister has pitched for direct transfer of urea subsidy to farmers and clearance of its arrears, which are pegged at Rs 50,000 crore by the end of the current fiscal. Besides, the industry has also made a case for decanalisation of urea to allow fertiliser companies to directly import urea as against the current practice where only three canalising agencies import the crop nutrient.

The industry is under tremendous stress due to subsidy arrears. So, the government must allocate an additional Rs 15,000 crore for the next three years towards fertilizer subsidy, pegging the total subsidy at Rs 90,000 crore per year.

Stressing for direct transfer of fertilizer subsidy to farmers, the industry has expressed willingness to work with government on this initiative. It will provide all the data required for direct transfer of subsidy to the government. The industry thinks that this is the opportune time for such a policy change since cost of production of Indian urea is about the same as price of imported urea. Excessive use of urea due its lower retail price is impacting soil health and subsequently farmers, and argued for curbs.

Urea is a controlled commodity and is being sold at Rs 5,360 per tonne, with the difference between cost of production and selling price being taken care of as subsidy to manufacturers. Subsidy on urea constitutes almost 70 per cent of the total production cost. India's annual demand for urea is about 30 million tonnes, while domestic production remains stagnant at 22 million tonnes. The rest is met through imports.


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