FinMin mulls phasing out urea subsidy in 3 yrs

Urea consumes almost half of the fertliser subsidy in the country

The Finance Ministry is considering phasing out urea subsidy in the next three years starting from the current financial year. Urea now consumes almost half of the fertliser subsidy in the country.

A proposal has been sent to Finance Minister P Chidambaram for his approval. If approved, a Cabinet note will be floated on the same.

Government officials, however, said since the political environment was not conducive for the move the finance minister would tread very cautiously.

As per the proposal, the Budget Estimate for subsidy for this year should also be cut in the Revised Estimates.

Officials said the Finance Ministry plans to go ahead with the proposal at the earliest but the Prime  Minster’s Office is not very comfortable going ahead with it at the moment. The Fertiliser Ministry too is opposed to the proposal.

When contacted, Fertiliser Minister Srikant Jena raised questions over the complete exercise of developing a system for direct transfer of subsidy, if the subsidy needs to be phased-out.

Urea prices are regulated by the government and are currently sold at Rs 5,360 per tonne for agricultural purposes.

The fertiliser department proposed to increase the Urea prices by 10% earlier this year. However, the cabinet referred the proposal back to the ministry. The last time the price of this key nutrient was revised in 2010. That time, the price was raised by 10% from Rs 4,830 to Rs 5,310.

Also, the Urea prices for consumers went up by Rs 50 recently as the cabinet approved an incentive of Rs 50 for the retailers to make them comply with the mobile based tracking system for the movement of subsidised fertilisers.

In 2011-12, urea consumption in India stood at 29 million tonnes compared to 28.2 million tonnes a year earlier. India imported 7.83 million tonnes of urea in 2011-12 compared to 6.6 million the previous year.

Subsidy on domestic as well as imported urea combined amounted to almost Rs 33,000 crore in 2011-12 against Rs 21,543 crore in 2010-11.

For the current fiscal, Urea subsidy has been pegged at Rs 32,400 crore.