Following the move to hike the price of gas, fertiliser companies have demanded that the Government free the pricing of urea.
Currently, urea is highly subsidised; the Government incurred a subsidy of around Rs 36,000 crore on the fertiliser in 2012-13.
The gas price revision will take effect from April 1, 2014. Subsequently, for every increase of $1 in the gas price, the impact will be Rs 3,155 crore annually from 2013-14 for the 23 million tonnes of urea produced in the country.
This will increase by Rs 4,144 crore annually for the projected production of 32 million tonnes of urea from 2017-18.
“There will be no choice but to pass on the price hike to consumers,” said U. S. Awasthi, Managing Director of IFFCO, the country’s largest fertiliser maker.
“Since the hike in the gas price has been to bring in investments to increase gas production indigenously, the same philosophy should be applied to the fertiliser industry,” said Awasthi. “The fertiliser sector should be freed from the control of the government and treated as part of the market driven economy.”
Fertiliser makers expect this price hike to impose an additional subsidy burden of around Rs 10,000 crore from the next fiscal.
“If the Government has decided to hike the input cost, then it should also take a call on the output price,” said Satish Chander, Director-General of the Fertiliser Association of India. “We are not getting the subsidy payment released on time and any increase in subsidy will adversely impact the industry,” he said.
Following the Government’s decision to raise the gas price, stocks of fertiliser companies staged a rally on Friday.