Poll Panel approves hike in fixed cost of urea by Rs 350/tonne

This move will lead to increase in subsidy by about Rs 900 crore

The Election Commission has given its approval to government's decision for increase in fixed cost of urea by up to Rs 350 per tonne, but there will not be any hike in the selling price.

This move would lead to increase in subsidy by about Rs 900 crore.

For urea plants, the fixed cost mainly includes salary and wages, contract labour, repair and maintenance and selling expenses.

The increase in fixed cost will eventually push the cost of urea production, while the selling price of urea is fixed at Rs 5,360 per tonne, resulting in higher subsidy bill.

On February 28, the Cabinet Committee on Economic Affairs (CCEA) had approved raising the fixed cost of urea by up to Rs 350 per tonne.

Following which the Fertiliser Ministry sought poll panel's approval because the code of conduct was implemented for the upcoming general elections.

"Poll panel has given its approval to move ahead with the CCEA's decision of raising the fixed cost of urea," sources said.

They added that increase in subsidy has also been compensated by slashing the subsidy on potash.

The minimum fixed cost, including the hike, should now be Rs 2,300 per tonne under the New Pricing Scheme (NPS) III, they said.

In the case of urea plants which are more than 30 years old, they will be given additional vintage allowance of Rs 150 per tonne.

Annual urea production in the country is stagnant at about 22 million tonnes, while the demand is about 30 million tonnes, so the gap of 8 million tonnes is met through imports.

Urea is sold to farmers at a fixed, subsidised maximum retail price of Rs 5,360 per tonne. The difference between the cost of production and the price is provided as subsidy.