Alagiri meets FM; opposes nutrient-based fert subsidy

Unable to get any assurance from the industry to retain the current price line, Fertliser Minister M K Alagiri has demanded that the proposed nutrient- based subsidy for the fertiliser sector be deferred by a year.

Under the nutrient-based subsidy (NBS), it was proposed to do away with maximum retail price (MRP) and replace the current system of giving subsidy to the industry with direct assistance to farmers.

Currently, fertilisers are sold at government-fixed prices, which are lower than their costs of production or import.

Since the industry has not given any assurance to not increase prices, Alagiri apprehended that implementation of this scheme could lead to hike in fertiliser prices which may not be desired at a time when food inflation is very high.

Alagiri met Mukherjee on Saturday and handed over a letter demanding postponement of the scheme at least by one year. The proposal to give direct subsidy to farmers was announced in the budget 2010.

Besides postponing the NBS, the minister also demanded that urea prices should not be increased for at least a year, sources in the knowledge of the matter said.

A group of ministers on fertiliser, headed by Mukherjee on January 20 had decided to implement NBS in key fertiliser components -- nitrogen (N), phosphorus (P) and potash (K) -- from April 1, 2010.

However, there was a rider on it as the implementation of the scheme was subject to a "written assurance" by the fertiliser industry that the current price line be maintained.

The GoM had added that the condition of securing 'written assurance' from the industry to retain the priceline after Agriculture Minister Sharad Pawar, Heavy Industries Minister Vilas Rao Deshmukh and Rural Development Minister CP Joshi along with Alagiri had expressed apprehension of a price rise.

Alagiri in his letter has pointed out that "there was hardly any credible assurance" from the industry but empathised with it since import prices of fertilisers are highly volatile.

Industry sources said the manufacturers had told the government that urea prices might go up by an average 10 per cent and others by about 5 per cent if the MRP system is abolished and subsidy is given to farmers directly.

At present, the MRP of urea is Rs 483 a quintal, that of DAP Rs 935 a quintal and MOP Rs 445.50 a quintal.

Alagiri has also pointed out that the government after thorough discussions in the past had decided not to implement the NBS in "one go".

Assuring that his ministry would cooperate for a smooth launch of the new scheme in phases, the minister has suggested measures to prevent excessive use of urea by the farming community.

"Excessive use of urea is not only due to its low MRP, but also due to availability of particular fertiliser in the vicinity," he said, adding there was a need to control the movement of urea and educate the farmers.

Warning that there could be riots if fertiliser prices are increased, the minister said, "any increase in MRP of urea at a time when there are protests everywhere against overall increase in prices of commodities, would further aggravate the situation."