Dithering on urea decontrol

Is it not anomalous that the Centre that harps on economic liberalisation, fiscal prudence and subsidy reduction should choose to defer the assurance it gave — decontrol of urea and bringing it under the nutrient-based subsidy scheme (NBS) — but seek to buy time instead by referring the matter to a committee of secretaries? There surely is something more than meets the eye. Last April, the fertiliser industry received its first dose of freedom when potassic and phosphatic fertilisers were freed from price control with the expectation that it would promote balanced fertiliser application through new fortified products and encourage extension services by the fertiliser industry. But urea has continued under the government regime of price and movement control, that kept the maximum retail price frozen for eight years till a the 10 per cent price hike in April 2010.

It is obvious that the full benefit of the NBS scheme would accrue to the industry if and only if urea is also decontrolled. The industry's expectation that urea too would be quickly brought under the NBS scheme has now been dashed. Hopefully, this dampener is temporary. The least the government should do is to fix a time limit by which urea is decontrolled. This will remove uncertainties and allow entrepreneurs and fertiliser companies to explore market opportunities. The current bias in favour of urea because of its lower price deserves to be changed in the long-term interest of soil health. The market is looking for customised products to meet specific needs of crop/soil conditions. Flow of investment in new capacities as also expansion or modernisation is a distinct possibility. Delay in decontrol of urea also means that the Finance Minister's assurance during the last Budget (that the new NBS system would move towards direct transfer of subsidies to the farmers) will not be implemented any time soon.

Clearly, urea decontrol is a politically-sensitive subject. Already reeling under the unmitigated onslaught of food inflation, New Delhi wants to play safe. It is also likely that coalition partners are exerting pressure not to touch urea at this point of time as elections are due in no fewer than four States. Decontrol is sure to push urea prices higher, but would bring relief from high levels of fertiliser subsidies. In its wisdom, the Government seems to have sacrificed fiscal prudence for electoral or coalition compulsions. Despite rising fertiliser consumption, improving the marginal productivity of soil still remains a challenge. This requires increased application of NPK and proper nutrients based on soil analysis. Dithering on urea decontrol will hardly help.

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