Govt defers Fertiliser Ministry's proposal to hike urea prices by 10%

India’s Cabinet Committee on Economic Affairs (CCEA), which met to discuss the Fertilizer Ministry’s proposal to raise the retail prices of urea by 10% to Rs 5,841 per tonne for the financial year 2012-13, has deferred the same. The suggestion to raise urea prices was made mainly to restore excessive use of soil nutrient and minimize the subsidy burden of the government to some extent.

The fertilizer ministry has proposed to modify the New Pricing Scheme (NPS) Stage-III instead of decontrolling the urea sector, mainly to promote balanced use of fertilizer, trim down its subsidy burden and to compensate companies of rising input costs, which has been opposed by various ministries.

Earlier, the government had plans to decontrol the urea sector by bringing it under the nutrient based subsidy (NBS) scheme. However, the proposal was opposed by the fertilizer ministry, among others in view of increase in retail prices of phosphatic (P) and potassic (K) fertilizers, which was decontrolled in April 2010. To compensate the price rise, farmers started using cheaper urea fertilizers, which led to imbalance in use of soil nutrients.

In 2011-12, urea is expected to have added Rs 24,500 crore to the fertilizer subsidy bill. Subsidy is mainly given on fertilizers, fuels and food and the difference between the production cost and the Maximum Retail Price (MRP) is paid to manufacturers by the government.

The annual demand for urea in the country is expected to be around 28 million tonne, of which 22 million tonne is indigenously produced and the rest is imported.  Urea is the only fertiliser that remains under full price control. Its current retail price is Rs 5,310 per tonne.