Aiming to cut down excessive consumption of urea, the Government is in the process of partially deregulating urea prices, a move which is likely to cut down the burgeoning subsidy bill currently being footed by the Centre.
According to sources privy to the development, the Chemical and Fertiliser Ministry has prepared a draft Cabinet note for partially deregulating urea. This note is likely to be sent for wider consultations to State Governments before it is finalised and moved for Cabinet approval.Sources further added that to begin with, the idea is to partially de-regulate urea and then look at the trend in terms of its consumption. However, it would be too early to say anything on whether later on the commodity will be completely deregulated or not, sources pointed out.
Excessive consumption of urea has been an area of concern with the Central Government, and in fact the Fertiliser Ministry had recently even sought views from various industry bodies including the Fertiliser Association of India (FAI) on how to the check the trend.India produces about 22 million tonnes (mt) of urea in a year, but consumes a little more than 30 million tonnes. The excess consumption is met through imports. Urea is the only fertiliser that is still under control and sold at a Government-notified price.
The last major revision was on April 1, 2010, when the price was increased to Rs5,310 per tonne from Rs4,830 per tonne. In October 2012, price was marginally hiked by Rs50 to Rs5,360 a tonne.In its pre-Budget recommendation to the Finance Ministry, the Fertiliser Ministry had said the maximum retail price of urea could be raised by 7 per cent annually over next five to seven years before its complete decontrol. This could help the Government save close to Rs1,200 crore on its subsidy bill for 2014-15.
The Government’s move to partially de-control its price is believed to be a part of the aforementioned strategy.However, with the sector being politically sensitive, the ministry has been giving various other alternatives where urea price would increase by 10 per cent this year and further changes could be considered later. This hike would translate into a saving of Rs1,600 crore towards fertiliser subsidy.
The Government has also deregulated diesel prices towards its aim of reducing the subsidy bill.The FY15 budgeted fertiliser subsidy is Rs67,970 crore out of which Rs43,300 crore is for urea.