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Before increasing the Minimum Support Price (MSP) for kharif crops, the Government may raise the urea price by 10 per cent. The Cabinet Committee on Economic Affairs (CCEA) is expected to discuss a proposal to hike urea price on Thursday.
With the increase in urea prices, the Government aims to cut up to Rs 2,000 crore on the total subsidy outgo on urea.
The last revision in urea prices happened in 2010 when they were raised to Rs 5,310/tonne from Rs 4,830.
An official source familiar with the development told Business Line , “The implementation of the proposal, modified New Pricing Scheme-III, is likely to be approved for a period of three years or till such time all the non-gas based urea units get converted to gas, which ever is earlier.”
Subsequently, the Government may consider Nutrient Based Subsidy (NBS) for urea, he added. However, this should be done after taking into account the situation vis-à-vis production, supply, price in international markets. NBS is being used for all other types of fertilisers, the source said.
Through the price increase the Government also aims to give some relief to the companies for the rise in the fixed cost. At the same time, it does not want financial sickness to attack operational plants.
PLAN PANEL NOT FOR HIKE
Meanwhile, the Planning Commission is not supporting the price hike proposal. Instead, it wants NBS to be brought for urea, an official said. But this was turned down by the Department of Agriculture and Cooperation and the Department of Fertiliser.
In fact, the Department of Agriculture and Cooperation argued that NBS has not yielded desired results in lowering the price or improving the availability of fertilisers to the farmers, he added. At the same time, the Department of Expenditure in the Finance Ministry supported the policy of modified NPS-III.
The Department of Expenditure also suggested that the New Investment Policy for Urea be amended. Simultaneously, a time-bound plan for conversion of non-gas based urea units should be put in place. This will reduce the subsidy burden. Once the difference between the price of indigenous and imported urea is reduced significantly, a proposal to bring urea under NBS can be considered, he explained.
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