Gas price hike could hit fert subsidy plan
If the Rangarajan committee’s views are accepted, the gas price would be around $8 per mmBtu (exclusive of transportation charges and marketing margins), compared with $4.20 at present. Sources said that the fertiliser ministry has contended that such a price won’t be viable for the fertiliser industry, which needs to add capacities to keep pace with the rising demand for fertilisers.
Basically, the fertiliser ministry wants the finance ministry to give clarity over the subsidy structure before the gas price is revised. It has estimated that a $4 per unit increase in price of gas would push up the cost of urea by R5,200 per tonne, and the annual fertiliser subsidy bill by around R10,000 crore at current (subsidised) retail prices for urea. Gas accounts for over three-fourths of the cost of production of fertilisers. A proposal to decontrol retail prices of urea has been hanging fire for long due to political sensitivities while there have been protests over the spike in prices of the
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