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There is no proposal to increase urea prices just yet, a top Fertiliser Ministry official said today.
"There were some rumours in the market last week about price increase because of which fertiliser company stocks went up. Today, too, there is some report but I can tell you categorically that there is no proposal to increase prices just yet," he said.
The official, who asked not to be identified because Parliament is in session, said his ministry had not moved any plan to increase urea rates.
Urea, the most used crop nutrient, is a controlled commodity and its maximum retail price (MRP) is fixed at Rs 5,360 per tonne. The government pays manufacturers the difference between cost of production and MRP.
A marginal increase in urea prices over the past 10 years and a projected rise in the subsidy bill that will follow the likely near-doubling of natural gas rates to $8.2-8.4 per million British thermal units may make a urea price hike inevitable.
"We don't know yet how much the gas price increase will be and when it will be implemented. Let them (Petroleum Ministry) announce it (gas price increase) first then we will firm up our plans," the official said.
For every $1 per mmBtu increase in gas prices, the subsidy bill will rise by $406 million (over Rs 2,395 crore).
Fertiliser plants are collectively the biggest consumer of domestically produced gas, getting supplies of 31.5 million standard cubic meters of the fuel daily. Natural gas accounts for as much as 65% of urea production costs in India.
In the interim budget, the government had proposed to keep the fertiliser subsidy for 2014-15 at about the same level as the previous financial year, drawing criticism by the industry, which is facing a liquidity crunch because of delayed subsidy payments.
Then Finance Minister P Chidambaram proposed a subsidy on crop nutrients at Rs 67,970 crore for the financial year ending March 2015 compared with the revised estimate of about Rs 67,971 crore in 2013-14.
In February, the government raised the 'fixed cost' of urea, one of the components used to determine its price, by up to Rs 350 per tonne.
The country's urea production has stagnated at 22 million tonnes since 2007-08, while current demand is about 30 million tonnes. The shortfall of 8 million tonnes is met through imports. No urea capacity has been added in India in the past almost 13 years.
