Nod likely for new urea pricing norms

New Delhi, July 26 | Updated: Jul 27 2006, 05:30am hrs
The much-awaited new urea pricing norms are likely to be cleared by the Cabinet Committee of Economic Affairs (CCEA) on Thursday.

The recommendations for new scheme (Stage III) as recommended by the YK Alagh working Group had received the finance ministrys nod last month. The department of fetilisers with some modification has forwarded it to CCEA. The CCEA is set to take it up for consideration tomorrow. Sources in the ministry of fertilisers told FE that new pricing norms were likely to be an extension of the Stage-II with minor modifications in the consumption of energy per tonne of urea based on the actual energy consumption level achieved in 2002-03.

Stage II had been in existence from April 1 2004 to March 31 2006. Under Stage III, capacity utilisation norms are understood to have kept at the same level and issue of variable cost increase has not been addressed, they added.

The new norms are unlikely to signify any major change, sources said. The recommendation of Alagh Panel, which had designed a suitable incentive mechanism for better efficiency, has not been accepted in toto. Similarly, the recommendation of direct subsidy to poor farmers has also been kept it abeyance

It is understood that the ministry has not specified any time limit for conversion of naphtha and fuel oil plant to gas. This, sources said, was due to non-availability of gas in adequate quantity.

An industry sources said, the new policy might not benefit any of the stakeholders. The government, the fertiliser companies and farmers could find it either neutral or detrimental.

For the government, the subsidy burden would continue to increase. The industry would be hit as the controlled price would be unremunerative on costly feedstocks and naphtha. As far as farmers are concerned, most of them in the far-flung and peripheral areas of the country, are unlikely to get the subsidised fertiliser.

High transportation cost would dissuade the companies from reaching the product to the intended beneficiaries of the subsidy.