'Creeping' Price Hike for Urea, Just Like Diesel: Sources
The Department of Fertilizers is working on the draft of the new urea policy, announced by the Finance Minister in the Budget this year.
According to a senior official in the department, the urea price hike may be a creeping hike just like diesel, to eventually reduce the subsidy burden.
The price hike could take place in February-March period, the official said
Kirit Parikh, chairman at Integrated Research & Action for Development and a former member of Planning Commission said, ''There is a strong need to rationalize the price of urea. If you increase the price of fertilizer and farmer's cost of production goes up then there would be a demand for increasing the MSP (Minimum support price) and therefore food prices will go up''.
He added that at a time when we are battling high food inflation one time hike would not be politically feasible, and a gradual increase in the urea price will be the right thing to do.
The department is expected to finalise the draft by the end of October and then send it to the Cabinet, according to sources.
The new urea policy will include a roadmap of the reforms in this sector. Currently, urea is immune to international price fluctuations in case of imports or any increase in the manufacturing price domestically, as the manufacturers keep the market price fixed and the subsidy is floating.
While for other fertilizers it is the other way round, the subsidy is fixed and the market price is floating.
There is going to be a huge emphasis on promoting bio and organic fertilizers, as this would help reduce the subsidy burden, soil health will get better and its cost of production won't be too much.
Satish Chander, director general of Fertilisers Associaltion of India (FAI) said, ''Balanced fertilization will be good for the soil and the subsidy will come down, it is a win -win situation for everyone; and should happen sooner than later.''
The department plans to reduce the use of inorganic fertilizers by 2-5 per cent/year.
Fertilisers Associaltion of India has been asked to prepare a policy note and submit it in the next 2 weeks. This is likely to include the possible impact of the reforms being suggested on the farm output and the aggregate subsidy burden.
"We are working closely with the government, so that this is done in a peaceful manner," said Mr Chander.
To have a comprehensive view on the policy, the department is expected to hold a meeting with the industry, FAI and the officials from the ministry of agriculture and the ministry of urban development.
Meanwhile the department may also seek an extra Rs. 16,000 crores as subsidy apart from the budgeted amount of Rs. 72,970 crores for the full fiscal. Also if the gas prices go up on 1st of October then this amount may escalate even further.
Reacting on the gas price revision, which is due on 1st October, Mr Chander said, ''If the gas price goes up by one dollar additional outgo on the subsidy will be more than 1000 crores, hence the gas price and the MRP would go up simultaneously.''
