The government has deferred its decision to free the prices of urea for now and bringing it under the Nutrient Based Subsidy (NBS) policy regime even as a panel of secretaries has been asked to work out a viable model for decontrolling the prices.
In a day of high political drama, when Minister of Chemicals and Fertilizers M K Alagiri offered to resign in the backdrop of the 2G spectrum allocation imbroglio, a group of ministers (GoM) took the decision of not freeing the prices as yet.
“NBS is going to be implemented (for urea) but not immediately. A panel of secretaries has to be first established, which will work out a definitive model based on the recommendations given by various ministries. Industry will be deregulated. However, this is likely to be announced during the (upcoming finance) Budget,” a senior official of the Department of Fertilizers (DoF) told Business Standard.
The secretaries’ panel, which would be represented by the secretaries of various ministries such as finance, commerce and industry, fertilisers and agriculture and also the Planning Commission, has been asked to prepare the report within the next one month.
“We are bullish about it because NBS has to come for urea, else there will be no investment and no expansion. It might be implemented from April 1, 2011. We will wait and watch. New investments have to come in the industry else import will increase. The committee of secretaries will come out with a proper solution,” said Satish Chandra, director general, Fertiliser Association of India.
Once urea comes under the NBS regime, decanalisation of imports would also take place. The government was also working at raising the urea prices by 2-5 per cent in 2011-2012, officials said.
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Officials in DoF also said the government would like to first determine the crucial aspect that once the prices of urea were decontrolled, they should not rise abnormally.
“We are expecting the reforms to take place, else, all expansion and investment would come to a halt. Urea should come under the NBS regime. It is in the interest for everybody,” underscored U S Awasthi, managing director of Indian Farmers Fertilizer Cooperative Ltd.
The Committee of Secretaries is also expected to consider the proposals of the committee headed by former agriculture secretary T Nanda Kumar that has recommended freeing urea prices under NBS to prevent its excessive usage of the fertilisers, reduction in government subsidy and maintaining the soil health.
The government had increased the prices of urea by 10 per cent on February 18 last year from Rs 4,830 to Rs 5,310 a tonne, which was effective from April 1. The revenue foregone towards fertilisers subsidy payout in 2009-10 was Rs 8,010 crore, which was 3.22 per cent of the total revenue forgone compared to 6.3 per cent in 2008-09 which amounted to Rs 14,200 crore.