The government's new urea policy for the next four years aims chiefly at promoting greater efficiency in the use of energy in urea production. The government claims that it will deliver multiple gains in terms of increased urea output, lower imports, reduced subsidy and smaller carbon footprint of the urea industry. By linking incentives given to urea manufacturers with their annual energy consumption, the new policy seeks to prompt them to go in for the most energy-efficient technologies to raise actual production beyond the reassessed rated capacities of their plants. Those units that fail to do so would stand to lose as their profit margins would tend to shrink. The government had earlier approved a gas-pooling policy to supply gas to all urea plants at a uniform price to provide them a level playing field in input costs. Going by the official reckoning, the new policy should lead to an annual incremental urea production of around two million tonnes. The annual saving in subsidy is anticipated at around Rs 2,618 crore directly due to lower energy consumption and Rs 2,211 crore indirectly due to import substitution.
A noteworthy feature of the new policy is that it seeks to trim urea subsidy only marginally, without raising its retail prices - which could have been viewed as an "anti-farmer" move. The government has also kept the subsidy rates for the decontrolled phosphatic and potassic fertilisers intact at the current level. The decision to pay freight subsidy on these fertilisers in a lumpsum is meant primarily to facilitate their free movement across the country as part of the "ease-of-doing-business" policy. These are, from the point of view of reform, disappointing. At best, they are piecemeal steps that do not foreclose the possibility of real reform in the future.
Problematically, these measures tend to perpetuate the prevailing wide differential between the prices of urea vis-à-vis phosphatic and potassic fertilisers, which is responsible for the skewed use of plant nutrients. Excessive use of lower-priced urea, in the absence of adequate application of other fertilisers, is causing widespread soil degradation and pollution of water and air to the detriment of crop productivity and human health. Moreover, the soils are turning deficient in not only major plant nutrients like phosphorus and potash but also in some minor, yet vital, nutrients like sulphur, zinc and boron. The need really is to rationalise the farm-gate prices of all fertilisers; only that can ensure their balanced and need-based application. Even if the government fears a steep hike in urea prices or a major cut in fertiliser subsidy, it could at least have tried other methods. One way would be to redistribute the fertiliser subsidy - cut it down on urea and use the saved amount to raise subsidies on phosphatic and potassic fertilisers. This would help bring a semblance of parity in the retail prices of fertilisers without affecting the farmers or increasing the overall subsidy burden on the exchequer. But the best course would be to pay the fertiliser subsidy in cash to the farmers and let them decide how much nitrogenous, phosphatic and potassic fertilisers they need to meet soil requirements. Such a measure has been advocated by many farm experts and has also been endorsed by the Shanta Kumar committee that went into food and fertiliser subsidies. This is a move that can lead to higher crop productivity without in any way hurting political interests.
