Govt explores deregulating urea, scrapping import duty

Subsidy costs quadrupled over past decade as UPA govt kept urea prices below production cost, fearing a backlash from the farm lobby

The government is considering removing price controls on urea and scrapping an import duty of 5 percent, as Prime Minister Narendra Modi moves to check subsidy costs and cut wasteful use of the crop nutrient.

Fertiliser subsidy costs quadrupled over the past decade as the previous government kept urea prices below the cost of production, fearing a backlash from the powerful farm lobby. Urea is the most widely used fertiliser in India.

Modi's government is now planning to decontrol the maximum retail price (MRP) of urea which is currently fixed at 5,360 rupees ($87) a tonne, the newspaper reported citing officials it did not name. The government could also raise the MRP by about 20 percent annually for the next three years, the report said.

Fertiliser ministry spokesman Y.K. Baweja declined to comment on the report.

The price for urea has risen just 16.5 percent since 2000, while the price of non-urea fertilisers like diammonium phosphate has nearly tripled and muriate of potash has quadrupled. The growing price gap has led farmers to use urea indiscriminately, industry executives have said.

The fertiliser ministry had pitched for a hike in urea prices even last year, but could not due to a subdued monsoon.

Liberalising urea prices would help domestic fertiliser companies such as Chambal Fertilisers and Chemicals and Rashtriya Chemicals and Fertilizers Ltd (RCF), while dumping the import duty could benefit Canada's Potash Corp of Saskatchewan , Mosaic Co of the United States and Russia's Uralkali .

India has already deregulated petrol and diesel prices.