GoM to discuss on increasing urea price

A Group of Ministers (GoM) on Fertiliser, headed by Finance Minister Pranab Mukherjee, is slated to meet here tomorrow to deliberate on raising the price of urea and decontrolling the sector.

"The GoM will discuss on decontrolling of urea prices at a meeting on January 5," a senior government official told PTI.

With the introduction of the nutrient-based subsidy (NBS) scheme that came into effect from April 2010, the government had freed the potassic and phosphetic fertilisers. However, it retains control over the price and movement of urea, which constitutes around half of India's fertiliser consumption.

At Rs 5,310 per tonne, urea is the the cheapest available fertiliser among others. Ministry sources said that government is likely to increase the price by 2-5 per cent per tonne to provide some relief to the manufacturers and offset the indiscriminate use of the fertiliser.

Meanwhile, sources in the Ministry said that though the GoM would discuss the urea decontrol issue, it might refrain from taking any concrete steps considering its adverse impacts on the farmers.

Moreover, sources said, the government would like to take a calibrated approach considering the impending assembly elections in West Bengal and Tamil Nadu.

The fertiliser industry has been pressing the government to decontrol the urea sector saying that the measure would encourage entrepreneurs to invest in the sector.

The Fertiliser Department, however, fears that decontrol would not be fair for all manufacturing units in the existing heterogeneous urea industry where production cost differs from one unit to the other.

The cost of urea production depends upon plant vintage, feedstock and the level of energy consumption.

The Fertiliser Department thus favours an extension of the existing New Pricing Scheme (NPS)-III for urea with some modifications, which include fixing a price band and allowing domestic industry and importers to sell the fertiliser within that band.

India's urea output is around 21 million tonnes, while the demand is 26 million tonnes. The gap is met through imports.