After global fertilizer prices declined and the domestic gas pricing formula revised, the fertilizer subsidy in the current fiscal may be lower than the ₹1.75-lakh crore allocated in the Budget, while urea subsidy, which accounts for the bulk, may be below ₹1-lakh crore.

“We may contain the urea subsidy within ₹1-lakh crore in current fiscal,” Fertilizer Secretary Arun Singhal told businessline. Overall fertilizer subsidy will be lower than the Budget Estimate, he said. The urea subsidy has been estimated at ₹1.31-lakh crore for 2023-24.

Officials said the imported urea has come down to $330/tonne (f.o.b, China) in the last tender from the average $475 in February and $665 in October 2022.

CCEA nod

Following the recent Cabinet decision, the price of domestic natural gas for April 8-30 has been notified at $7.92 per million British thermal units (mBtu) on a gross calorific basis (GCV). Further, for the gas produced by ONGC/ Oil India (OIL) from their nomination fields, the above mentioned administed price mechanism rate shall be subject to a ceiling of $6.50 per mBtu on GCV basis for the same period. Before the revision, the price was $8.57.

Though fertilizer sector is the biggest consumer of domestic natural gas, having 29 per cent share, the current supply roughly meets 15 per cent of the industry’s requirement the rest is met through import. Still, the government estimates $1 drop in gas prices can benefit fertilizer companies up to ₹1,000 crore.

The Cabinet Committee on Economic Affairs (CCEA) on April 7 approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of state-run ONGC and OIL, New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where Production Sharing Contract (PSC) provides for government’s approval of prices. Accordingly, price of such natural gas shall be 10 per cent of the monthly average of Indian crude basket and shall be notified on monthly basis.

Promoting alternatives

Singhal also said the nutrient-based subsidy for kharif 2023 will be announced in a month. Industry experts see considerable reduction in subsidy from the rabi 2022 levels – ₹98.02/kg for nitrogen, ₹66.93/kg for phosphorus, ₹23.65/kg for potash and ₹6.12/kg for sulphur.

The Fertilizer Secretary further said the government has been taking several steps to reduce chemical fertiliser consumption by promoting alternatives like bio-fertilisers. “The PM-PRANAM scheme as announced in Budget will soon be rolled out. We are also coming out with a policy to support use of organic manure. Besides, the agriculture ministry, too has some other schemes which all aim at reducing use of chemical fertilisers,” Singhal said.

Under PM-PRANAM, the Centre will grant 50 per cent of the subsidy amount saved by a State due to reduction in consumption of chemical fertilisers. However, the government is likely to exclude nano-urea and nano-DAP in this scheme even though both are chemical fertilisers so that their sales are not affected. The government currently does not provide any subsidy for nano-urea and nano-DAP.