GoM may finalise urea price decontrol policy on Aug 5

A Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee would meet on August 5 to finalise the policy on partially decontrolling urea prices.

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

"The meeting of the GoM is scheduled on August 5 at 1700 hrs. The GoM may finalise the much-awaited policy on urea price decontrol," a senior Fertiliser Ministry official said.

The GoM will discuss the draft policy, prepared by the Committee of Secretaries (CoS) headed by Planning Commission member Saumitra Chaudhuri, that has suggested partially freeing the retail price of urea besides hiking the rate by 10% after a year of implementing the new policy.

It has also recommended notional price pooling of natural gas for the fertiliser sector and an additional subsidy for under-performing units to improve the production.

Under notional gas price pooling, the government will calculate the subsidy on urea on the basis of weighted average pooled gas price.

The CoS has noted that the gas price pooling model and freeing of urea retail prices would enhance domestic output, as the cost of production of gas-based units is much lower than the imported urea price.

As much as 80% of India's production of urea is gas-based and the urea manufacturers now buy gas from suppliers through separate Production Sharing Contracts.

The draft policy has also suggested that the government should purchase natural gas directly through the Fertiliser Industry Coordination Committee and supply to companies at a weighted average price.

Notional gas price pooling has been recommended for 17 fertiliser units. However, four units -- RCF Trombay, GSFC and two units of BVFCL -- will be kept out of the ambit of this gas price pooling arrangement.

Demand for urea is expected to rise to 30 million tonne in the next five years. The domestic production remained stagnant at 21.2 million tonne in 2009-10.

After the GoM approval, the draft proposal would be sent to the Cabinet.