Cabinet clears new urea policy, to cut subsidy by Rs 4,800 cr

Maximum retail price of urea for farmers has been left untouched at Rs 268 per bag of 50 kgs

The government today approved a new urea policy aiming to increase domestic production by 2 million tonnes and reduce its subsidy bill by over Rs 4,800 crore annually, but decided not to raise retail prices.

The maximum retail price (MRP) of urea for farmers has been left untouched at Rs 268 per bag of 50 kgs, excluding local taxes. Farmers would have to pay an additional Rs 14 per bag for neem-coated urea.

The Cabinet today approved a comprehensive New Urea Policy 2015 for the next four fiscals with multiple objectives of maximising indigenous urea production and promoting energy efficiency in urea units to reduce the government's subsidy burden, the Fertiliser Ministry said in a statement.

"The policy will result in direct saving of subsidy of around Rs 2,618 crore and indirect saving of Rs 2,211 crore on account of revised specific energy consumption norms and import substitution, respectively, during the next four years. Total savings would be Rs 4,829 crore," it added.

The new policy is also expected to result in an additional production of around 20 lakh tonnes of urea annually.

India's urea production has remained stagnant at 22 million tonnes (MT) annually and the country has to import about 8 MT to meet the domestic demand.

The policy will ensure timely supply of urea to farmers at the same retail price with lesser financial burden on the exchequer, besides reducing import dependence.

The movement plan for urea will continue to be given by the government every month to urea suppliers to ensure its timely and adequate availability in all parts of the country.

The Ministry said savings in energy will bring down the carbon footprint as well. The policy will enable the domestic urea sector, with 30 urea producing units, to become more energy efficient, resulting in rationalisation of subsidy burden.

"Beneficiaries of this policy would be all the farmers of the country, urea industry and the government of India," it said.

Earlier, the government had approved gas pooling policy under which all urea units would get gas at a uniform price.