Fertiliser subsidy to net off benefit on cheaper gas to fertiliser units

Subsidy for potash and phosphates has come down by Rs 2,000 per tonne in line with the fall in global prices

The department of fertiliser has decided to net off and include the benefit accruing to the fertiliser companies through access to cheaper natural gas as per priority allocation to the sector while providing fertiliser subsidy.

According to official sources, the fertiliser companies get natural gas at administered price under priority allocation compared to other sectors like power an chemicals etc. On the other hand, there is a full fledged subsidy worked out for the fertiliser companies in making its pricing affordable for the farmers.

However some of the fertiliser companies are not fully disclosing the benefit accrued to them through cheaper natural gas in working out the MRP of the fertiliser. This is particularly noticed in case of non urea fertiliser, potash and phosphates since the urea pricing is completely controlled.

Therefore empowered group of ministers nave decided that the subsidy accruing to the fertiliser companies especially non urea category like potash, phosphates etc have take into account the cheaper natural gas which these companies are using. This will avoid duplication of subsidy to a single sector and reduce the fertiliser subsidy to some extent annually.

Officials explained that off late apart from urea, some of the fertiliser companies are also getting the befit of the administered gas and that benefit has to be either passed on to the consumer or netted off from the total subsidy which they are receiving as part of fertiliser subsidy, said officials.

Therefore whether that benefit will be disclosed in calculating the MRP of the non urea fertiliser by reducing the MRP to that extent or MRP remaining constant, subsidy given to such companies will be slashed, will be worked out by the ministry of fertiliser once elections are over, said officials.

Fertiliser companies have some freedom in pricing the non urea fertilisers since the subsidy is fixed and market prices fluctuate in line with the international prices. In urea, the MRP is fixed and subsidy keeps floating with changing global prices. 

The subsidy for the potash and phosphates has come down by Rs 2,000 per tonne in line with the fall in the global prices. Accordingly, total subsidy on fertilisers is likely to come down by Rs 900 crore per annum due to this decision.

Meanwhile, the Commission for Agricultural Costs (CACP) has recommended several options for better handling of the fertiliser subsidy by better distribution of the subsidy and streamlining the price differences between urea and non urea fertiliser.

CACP is of the view that the fertiliser subsidy to the farmers should not be routed through fertiliser manufacturing units and rather should be directly given to the farmers. It will solve two problems. First, with money in hand, the farmers will decide which fertilisers to buy and may not rely wholly on urea based fertiliser.

The other option suggested for rationalizing the subsidy is hiking the price of urea so that its disparity in price with non urea varieties will be narrowed. This way the farmers will be motivated to use even non urea varieties with same money. Accordingly, the report has estimated that 10% increase in urea will bring down the price for non urea varieties by 15-18%.