The Committee of Secretaries (CoS) headed by Planning Commission member Saumitra Chaudhuri has finalised the draft proposal on bringing urea under the Nutrient Based Subsidy (NBS) policy, that would seek to rationalise the subsidy payout structure.
The ball is now in the court of the Empowered Group of Ministers (EGoM) that would take a final call on this and would also consider the proposal to free urea prices from government control.
The panel which had met Friday had granted its in-principle approval to the draft proposal and forwarded it to the EGoM for its final approval. The EGoM was earlier scheduled to meet on May 3 but it had been postponed for a later date to ensure attendance of all key ministers. The draft proposal had fixed the subsidy content for urea within the range of Rs 4,000-Rs 4,200 a tonne based on prevailing gas prices in 2009-10, while the industry had asked the quantum of subsidy to be fixed between Rs 4,600-Rs 5,600 a tonne based on the gas prices of the last financial year.
The report has also recommended conversion of Naptha-based units to gas-based producers within the next three years for a uniform implementation of the NBS.
It had also looked at the option of creating three sub-groups for the gas-based units based on their conversion prior before and after 1992, as per existing norms. The subsidy amount has been divided into Rs 4,000, Rs 4,600 and Rs 5,600 a tonne with the condition of bringing it down to Rs 4,000 a tonne within the next three years. This recommendation had been opposed by some fertiliser units like Nagarjuna Fertilisers and Chemicals Ltd (NFCL) and DCM Shriram.
The proposal had also recommended steps to gradually decontrol urea prices from government control, in line with other phosphatic and potassic fertilisers. The government had already freed prices of all non-urea fertilisers since April last year and brought them under NBS policy.
“The basic objective is to rationalise the overall subsidy structure for urea by bringing it under NBS. However, decontrolling prices is a political issue, which would be done in a phased manner,” a senior official from the Department of Fertilisers said but did not wish to be quoted.
The EGoM is also likely to finalise the new urea investment policy as existing urea policy had failed to attract any investments in the greenfield or brownfield projects in the sector in the backdrop of rising gas prices. Once the EGoM headed by Finance Minister Pranab Mukherjee gives its nod, the draft proposal would be sent to the Cabinet for its final approval.
