The ministry of chemicals and fertilisers is expected to apprise the cabinet committee on economic affairs (CCEA) of its reservations on the decontrol of the urea price as it will have an adverse impact on the marginal farmers.
The ministry is likely to move a Cabinet note on urea decontrol in a fortnight. It is expected to forward the recommendations of a ministerial group led by finance minister Pranab Mukherjee, proposing immediate decontrol of the commodity with an informal understanding with producers not to raise price by more than 10% in the first year.
The proposal has the strong backing of the expenditure department in the finance ministry and the Planning Commission. The chemicals and the agriculture ministries have, however, opposed the move.
Nearly half of the total subsidy on fertilisers given every year goes to urea, making its price decontrol imperative for the government to control its fiscal deficit.
This financial year, the estimated subsidy outgo on urea is R20,291 crore out of the R49,998-crore subsidy going to plant nutrients. This estimate assumes that the commodity is decontrolled some time in the second or third quarter, failing which the state’s financial health could further deteriorate. Urea received a third of the total fertiliser subsidy outgo in the economic crisis year of 2008-09, when the government spent R99,456 crore on all plant nutrients on account of a global commodity boom.
On August 5, the Pranab Mukherjee-led group recommended bringing urea under the nutrient-based policy, raising its price by 10% immediately and decontrolling the commodity from the next fiscal. The nutrient-based subsidy will ensure that there would be some comfort to farmers even after the price deregulation, depending on the government’s paying capacity.
Chemicals and fertilisers minister M K Alagiri, who has already urged Prime Minister Manmohan Singh to intervene, believes that pricing freedom would only help producers to make ?huge gains? at the expense of farmers. The minister has said that the decontrol of other fertilisers ? phosphorous and potash ? and bringing them under the nutrient-based policy from April 2010 has not helped farmers either in terms of price reduction or in a wider choice of fertilisers.
In fact, farm gate prices of phosphatic and potash fertilisers have risen, even as the subsidy bill is growing incessantly, the minister told Singh.