Differences over urea decontrol, CCEA to take call

Inter-ministerial differences persist over freeing of urea from government price control, with strong opposition to the move coming from ministries of agriculture and fertilisers, sources said.

Contrary to earlier reports, the issue had remained unresolved at the last meeting of the Group of Ministers on Fertiliser on August 5, they said.

In the backdrop of wide differences on the issue, Finance Minister Pranab Mukherjee had suggested that all the inter-ministerial views on the issue should be sent to the Cabinet Committee on Economic Affairs, which will take a final call, source said. Mukherjee heads the GoM on fertiliser.

Besides the ministries of agriculture and fertiliser, the Petroleum and Natural Gas as also the Commerce Ministry were also opposed to the move to free urea from price controls.

In the note being prepared by the Fertiliser Ministry, it is contended that the urea prices would go up, affecting the crop production.

The proposal was, however, being pushed by the Finance Ministry and the Planning Commission as they are concerned over big subsidy on fertiliser. In FY11, it was estimated to be Rs 52,840 crore, almost half of which was on account of urea.

Urea is the only fertiliser that remains under full price control. The government had partially freed prices of phosphatic and potash fertilisers in the last fiscal.

Under the draft policy prepared by the Committee of Secretaries, a partial freeing of the retail price of urea was proposed.

It also proposed that with the partial decontrol kicking in, the industry can hike rates by 10% after a year.

The Agriculture Ministry does not want the prices to escalate. It feels the decontrol could wait for 2-3 years, sources said. At present, MRP (maximum retail price) of urea is Rs 5,310 a tonne.

Before the GoM, Fertiliser minister MK Azhagiri had written to Prime Minister Manmohan Singh, opposing decontrol of widely used fertiliser. He said the move should wait till amendment to the new investment policy for the sector is brought about.

Currently, the domestic production is stagnant at 21-22 million tonne as against demand of 27-28 million tonne.