FinMin mulls phasing out urea subsidy in 3 years

The finance ministry is considering phasing out the urea subsidy in the next three years, starting from the current financial year. Almost half the fertliser subsidy is now for urea.

A proposal on this has been sent to Finance Minister P Chidambaram. If approved, a cabinet note will be circulated. Government officials said as the political environment was not conducive for such a move, the minister would tread cautiously. The proposal says the revised budget estimates on this count for the year should be cut.

Officials said the finance ministry planned to go ahead with the proposal at the earliest but the Prime Minister’s Office was not very comfortable; the fertiliser ministry was also opposed. When asked, Srikant Jena, minister of state for fertiliser, raised questions over the entire exercise of developing a system for direct transfer of the subsidy.

Urea pricing is regulated by the government. It is currently sold at Rs 5,360 a tonne for agricultural purposes. The fertiliser ministry proposed to raise the price by 10 per cent earlier this year; it was referred back by the Cabinet.

The last time the price of this key nutrient was revised was in 2010, by 10 per cent, from Rs 4,830 to Rs 5,310 a tonne. They went up recently by another Rs 50 a tonne.