Amid a cut in urea subsidy in the Budget for 2022-23, the government has admitted that the demand could be more and it may be made available in supplementary demand for grants as there is no intention to either increase the price or cut supply. Besides, the current retail price of ₹266.5 per 45 kg bag may be continued under the proposed urea policy for another two years.

Of the total fertiliser subsidy, about 70 per cent goes towards provide cheaper urea to farmers while the rest is used for subsidising potash and phosphorous nutrients. The actual price of urea ranges from ₹1,000 to ₹2,000 for a 45 kg bag.

Against ₹84,990 crore allotted for urea subsidy in Revised Estimates for 2021-22, the government has allocated ₹67,202 crore for 2022-23 (BE). When pointed out by the standing committee about this gap, amid high prices of urea globally, the Department of Fertilisers said, “Against the projection of ₹72,128 crore, an amount of ₹46,596.78 crore (for domestically produced urea) has been allocated under BE 2022-23. As the allocated amount is not sufficient to meet the projected requirement of subsidy funds for the year 2022-23, the requirement of additional funds will be re-assessed and demanded at the time of RE/Supplementary for 2022-23 depending on the price of raw material and fertilizers.”

Draft CCEA Note

The draft CCEA Note prepared by Department of Fertilizers for continuation of ongoing urea subsidy scheme until March 31, 2024 after incorporating comments of other ministries/departments and counter comments has already been sent to the Department of Expenditure for approval, according to the Standing Committee report placed in the Parliament on Monday.

In August last year, the Expenditure Finance Committee(EFC) had recommended that the Department of Fertilisers come up with a subsidy mechanism linked to import price parity of urea or a nutrient-based subsidy (NBS) or based on any other objective criteria. The domestic price of urea should be market-determined and not fixed, it said. The subsidy should not be calculated unit wise but be based on some objective criteria as mentioned above, it added.

But citing a third party evaluation report, the parliamentary panel has said that since urea is a very sensitive fertilizer, the government should make wide consultations with all stakeholders including the farmers on the feasibility of bringing urea under NBS Scheme, the extent to which it would affect the interests of farmers, its impact on agricultural production, etc. before arriving at a decision in this regard.

“The Ministry of Finance and EFC may be requested to extend the present urea subsidy scheme beyond March 31, 2022 as recommended in the Third Party Evaluation Report. This recommendation may also be shared with the Ministry of Finance for its consideration,” it said.

The Third Party Evaluation conducted on urea subsidy recommended that there is a necessity for continuation of the urea subsidy scheme to help the urea industries, farmers and the agriculture sector as it has a great impact on agricultural sector in increasing crop yield and reducing the expenditure of farmers for cultivation.

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