The government would have to bridge a resource gap of Rs 2,000 crore on account of the complete roll back of the Re 1 per kg hike in urea prices proposed in the Union Budget for 1998-99.
Of this, the government will lose Rs 1,600 crore because of increased outgo on urea subsidy. Added to this is the Rs 400 crore extra subsidy allocated for decontrolled potassic and phosphatic fertilisers this year.
In the vote-on-account presented in March, the government had provided a subsidy on urea which amounted to Rs 7,600 crore. However, in the 1998-99 Union Budget, the government sought to bring it down to Rs 6,000 crore by raising urea prices by Re 1 per kg.
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This implies that by rolling back the proposed price-hike completely, the government would have to find additional resources to the tune of Rs 1,600 crore which it would have, otherwise, generated from the increased prices.
Moreover, finance minister Yashwant Sinha had also proposed to raise subsidy on decontrolled potassic and phosphatic fertilisers from Rs 2,600 crore in the revised estimates for 1997-98 to Rs 3,000 crore. Since in his reply to the budget debate yesterday Sinha did not suggest any revision in this subsidy, it is presumed that the government would have to shell out the extra Rs 400 crore for postassic and phosphatic fertilisers.
Sinha had expressed concern over the increasing nutrient imbalance in the soil. He had said that for achieving optimum crop response ratio to fertiliser use, the use of all the three nutrients _ nitrogen (N), phosphorus (P) and potassium (K)_ should be balanced.
He had said that this balance had been progressively distorted over time because of the low price of urea compared with decontrolled fertilisers. The NPK balance, which was 5.9:2.4:1 in 1991-92, had changed adversely to 10:2.9:1 by 1996-97. The minister had said that an increase in the price of urea would help restore this balance.
The increase, according to him, was also justified on the ground of rising costs, which had led to a more than 50 per cent increase in the subsidy on indigenously produced urea in two years between 1995-96 and revised estimates for 1997-98.
However, following public outcry over the urea price-hike, the minister had to roll back the hike by half, the day following the budget. The complete roll-back comes in the wake of the opposition to the move by some of the constituents of the ruling coalition, especially the Akali Dal.