CCEA to discuss urea price today

After a gap about of two years, urea prices might finally record a rise. The Cabinet Committee on Economic Affairs is likely to take up the issue tomorrow.

Currently, subsidised urea is sold at Rs 5,310 a tonne for agricultural use.

The Department of Fertilisers has proposed a 10 per cent rise in urea prices. The proposal is broadly in line with the government’s aim to reduce fertiliser subsidies. For the current financial year, the government has pegged fertiliser subsidy at Rs 60,974 crore, compared with Rs 67,199 crore in 2011-12.

According to officials privy to the development, this time, the rise in urea prices is also bundled with the modified New Pricing Scheme (NPS) III for urea. Under the proposed changes in the NPS, fixed costs to companies would be set at a minimum of Rs 2,300 a tonne of urea manufactured. Companies with costs fixed below Rs 2,300 would be brought to the benchmark level, while for companies with higher fixed prices, Rs 350 would be added to the fixed costs. Currently, fixed costs for each urea manufacturer is different.

For long, the industry has been demanding either deregulation of urea, or bringing urea under the nutrient-based subsidy (NBS) regime. However, in 2011, Minister of State for Chemicals & Fertilisers Srikant Kumar Jena had said NBS results for non-urea fertilisers were not encouraging enough for the ministry to extend the scheme to urea.

The NBS regime for non-urea fertilisers was adopted in 2010. Since then, prices of decontrolled fertilisers have risen significantly.

According to estimates, a 10 per cent rise in urea prices would reduce fertiliser subsidy by about Rs 1,600 crore.

The government had last revised urea prices on April 1, 2010---from Rs 4,380 a tonne to Rs 5,310 a tonne.