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The Fertiliser Ministry has sought clarifications from the Committee of Secretaries (CoS) on a proposal to increase urea prices by 10 per cent in the draft policy on urea decontrol.
The CoS, under the chairmanship of Planning Commission Member, Mr Saumitra Chaudhuri, suggested partially freeing the retail price of urea in the draft policy, besides hiking the rate by 10 per cent after a year of implementing the new policy.
It has also recommended ‘notional price pooling’ of natural gas for the fertiliser sector and an additional subsidy for under-performing units to improve the production efficiency.
“The Fertiliser and Chemicals Minister, Mr M.K. Alagiri, has raised queries on the draft policy. The Ministry has asked the CoS the reasons for recommending a urea price hike,” a senior Fertiliser Ministry official told PTI.
The Ministry has also asked the CoS to check the legal compatibility and tax implications of gas price pooling and the impact on naphtha-based fertiliser units, the official said.
Urea is the only fertiliser that remains under full price control after the government partially freed the prices of phosphatic and potash fertilisers at the beginning of the previous fiscal. Its current retail price is Rs 5,310/tonne.
As much as 80 per cent of India’s production of urea is gas-based and the urea manufacturers now buy gas from suppliers through separate Production Sharing Contracts.
The CoS has suggested that the government should purchase natural gas directly through the Fertiliser Industry Coordination Committee and supply it to companies at a “weighted average price’’.
The CoS has also recommended ‘notional gas price pooling’ for 17 fertiliser units and said the government will calculate the subsidy on urea based on a weighted average pooled gas price.
However, four units — RCF Trombay, GSFC and two units of BVFCL — will be kept out of the ambit of this gas price pooling arrangement.
Demand for urea is expected to increase to 30 million tonnes in the next five years and India has to enhance the domestic production, which remained stagnant at 21.2 million tonnes in 2009-10.
The CoS noted that the gas price pooling model and freeing of urea retail prices would enhance domestic production, as the cost of production of gas-based units is much lower than the imported urea price.
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