The next Government in power may well have to decontrol urea prices or allow sharp farm gate price increases if the fertiliser subsidy target for 2014-15 set in the interim budget is to be met.

For 2013-14, the total subsidy on all fertilisers has been contained at ₹67,971.5 crore, as per the revised estimates.

The fertiliser industry, on the other side, has pegged the total subsidy requirement for the current fiscal at ₹1.07 lakh crore. In other words, there would be a carry over of around ₹39,028 crore to the coming fiscal.

However, the subsidy for 2014-15 has been budgeted at ₹67,970.30 crore, which after accounting for the carryover of the current fiscal would leave hardly ₹28,942 crore. On top of this, the industry estimates that the Government’s proposed raising of domestically produced natural gas from an average of $4.2 per mmbtu to $8.4 levels would straightaway lead to higher urea production costs of ₹10,000 crore. “It is clear from this that the only way to keep the subsidy within the budgeted levels is to decontrol urea prices or allow a sharp hike in prices,” an industry source said.

The scope for raising the prices of non-urea complexes such as di-ammonium phosphate (DAP) is limited given the already declining consumption levels. In the April-September period, consumption of non-urea complexes was down 17 per cent, while the urea sales were up 11 per cent. Commenting on provisions made by Finance Minister P Chidambaram in his interim budget for 2014-15, Satish Chander, Director General of the Fertiliser Association of India, said “The subsidy provided in interim budget is inadequate and not realistic. We will still have a huge carry forward.”

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