An empowered group of ministers (EGoM) under Finance Minister Pranab Mukherjee is expected to meet in the next couple of weeks to finally approve the Nutrient Based Subsidy (NBS) policy for urea.
While a committee of secretaries (CoS) formed by Mukherjee under the chairmanship of Saumitra Chaudhuri, member of the Prime Minister’s Economic Advisory Council (PMEAC), has already finalised a daft model on how the subsidy would be distributed for the urea sector under the NBS policy, the proposal got stuck with for Chemicals and Fertilisers Minister M K Alagiri who had some reservations on the model as he felt that it is depriving the farmers.
The minister is learnt to have given his green signal after making “minor changes to the draft proposal” and it is now ready to be given a final approval by the EGoM. After this, it would be sent to the Cabinet Committee on Economic Affairs that would sanction it, a senior official in the Department of Fertilisers told Business Standard.
NBS policy coverage for urea is expected to bring in more transparency and investments into the sector, which relies on imports heavily and suffers from lack of production capacity. There had been no fresh investments in the sector for more than a decade due to uncertainty in the pricing structure.
Imports of urea have risen sharply to six million tonnes (mt) in 2010-11 from 640,000 tonnes in 2004-05. Last year, the total consumption of urea was 28 mt, out of which 22 mt was met through domestic production, according to official estimates.
The coverage of urea under the NBS policy was expected to take place in the beginning of this financial year and the CoS was asked to approve a model by February. However, due to severe differences between the Planning Commission and the Department of Fertilisers, the proposal got delayed.
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The NBS policy came into effect from April 1, 2010, in order to encourage balanced usage of fertilisers and rationalise subsidy. It was mainly introduced for phosphatic and potassic fertilisers and other micro-nutrients.
Under the policy, the prices of fertilisers are not administered by the government anymore and companies are free to fix their retail prices.