Cabinet to soon consider amending NPS-III

Urea to be kept outside NBS for now

The Cabinet Committee on Economic Affairs (CCEA) will consider amending the New Pricing Scheme (NPS) III to determine the quantum of subsidy to be paid for indigenous urea.

Earlier, when the government had introduced the Nutrient Based Subsidy (NBS) Scheme for Nitrogen (N), Phosphorous (P) and Potassium (K) fertilizers, under which their prices were decontrolled, it had decided to include urea into the policy in a phased manner.

“Urea will not be included under the NBS policy for now. We may do it in the next financial year. For the current year, we have made changes to NPS-III, which is waiting for cabinet approval,” said an official from the Department of Fertilisers.

The government has dropped the plan to introduce NPS-IV that might have had an additional subsidy requirement, the official said.

Under the NBS policy, subsidy for indigenous and imported P&K fertilisers have been announced on an annual basis for 2010-11 based on the prevailing fertiliser prices and price trends in the international market. Subsidy for indigenous urea is provided based on NPS-III.

However, the industry is miffed with the government’s decision and believes it was high time the government brought urea under the ambit of NBS in order to promote balanced fertilisation and decanalise its imports.

“NBS was meant to promote all fertilisers. By keeping urea out of the policy only adds to the confusion. The government should at least lay down a road map for urea with separate subsidy levels for gas-based urea plants, naphtha-based and fuel-based plants. This would also help reduce the subsidy burden of the government,” said Satish Chander, director general, Fertiliser Association of India (FAI).

He said if urea was included urea in the NBS policy, more players would come into the sector and subsequently that would create a market where urea would be competitively priced and sufficiently available.
 

EXPENDITURE ON FERTILISER SUBSIDY
Year	Indigenous P&K	Indigenous urea	Imported P&K	Imported urea	Total
2005-06	4499.20	10625.57	2096.99	2140.88	19389.64
2006-07	6648.17	12650.37	3649.95	5071.06	28019.55
2007-08	10333.80	16450.37	6600.00	9935.14	43319.31
2008-09	32957.10	20968.74	32597.50	12971.38	99494.72
2009-10	16000.00	17580.25	23452.06	6999.63	64031.94
Source: Department of Fertilisers (Ministry of Chemicals and Fertilisers)                            Value in Rs  crore

At present, about 21 million tonnes of urea is produced while about 5 million tonnes is imported. Domestic production of urea increased by 6 per cent in 2009-10 to 21.12 million tonnes from 19.92 million tonnes in 2008-09. During the April-June period, the sale of urea jumped by 13.5 per cent to 4.69 million tonnes from 4.13 million in the same period last year.

The government had raised the prices of urea by 10 per cent on February 18, from Rs4,830 to Rs5,310 a tonne, effective from April 1. The revenue foregone towards fertilisers subsidy payout in 2009-10 was Rs8,010 crores, which was 3.22 per cent of the total revenue forgone, compared to 6.3 per cent in 2008-09, which amounted to Rs14,200 crore.