To reduce its subsidy burden, the Cabinet is likely to consider lowering the rates on various nutrients for decontrolled potassic and phosphatic fertilisers.
Once approved, the move will bring down the decontrolled fertiliser subsidy bill by about 15 per cent, which is less than the Budget estimate.
At present, urea comes under the category of controlled fertiliser and its retail prices are fixed by the Government.
The difference between its retail and cost price is paid as subsidy.
But, phosphatic (DAP) and potassic (MOP) fertilisers are decontrolled. Here, the companies are free to fix the retail price, while subsidy is given on the basis of nutrients.
This system is known as nutrient-based subsidy (NBS), which was implemented from April 1, 2010.
“The Cabinet may discuss lower subsidy on the three nutrients, Nitrogen (N), Phosphorus (P) and Potassium (K), while subsidy on sulphur may not see any change,” a senior Government official told Business Line .
global prices
Since, prices of these nutrients have declined in the international markets, the lowering of subsidy would not raise the retail prices of decontrolled fertilisers, he added.
If there is no change in the subsidy rates for nutrients, the subsidy bill for 2013-14 could be Rs 32,703 crore.
However, lowering the rates would bring down the subsidy bill by 15 per cent to Rs 27,782 crore.
This is lower than the Budget provision of Rs 29,426 crore for subsidy on decontrolled fertilisers in 2013-14.
The official said with lower prices in the international market, it was expected that companies would reduce the retail prices from Rs 24,000 a tonne for DAP and Rs 17,000 for MOP.
“In case the retail prices are not reduced as expected and the companies are found to be indulging in undue profiteering, the Inter Ministerial Committee (IMC) will review and recommend suitable measures,” the official added.