Govt clears urea policy, to cut subsidy by Rs 4,829 cr

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New Delhi | Published: May 14, 2015 12:12:27 AM

The Narendra Modi government aims to cut down fertiliser subsidy to the tune of Rs 4,829 crore over the next four years...

The Narendra Modi government aims to cut down fertiliser subsidy to the tune of Rs 4,829 crore over the next four years with the implementation of the New Urea Policy 2015 approved  by the Cabinet on Wednesday, which includes incentives for energy-efficient units.

The new policy is expected to result in annual incremental urea production of around 2 million tonnes, official sources said. The selling price of urea and subsidy rates for fertilisers under nutrient based subsidy (NBS) scheme, however, will remain unchanged, in what indicates that the decontrol of the pricing of this widely used fertiliser is not on the government’s immediate agenda.

“The policy will result in direct saving of subsidy of around R2,618 crore and indirect saving of Rs 2,211 crore on account of revised specific energy consumption norms and import substitution, respectively during the next four years,” according to an official release.

Sources said the 30 urea manufacturing units in the country has been categorised into three groups:  those using 5-6 giga calories to produce one metric tonne of the fertiliser, 6-7 giga calories/mt and above 7 giga calories/mt. The units would be incentivised to cut energy use, so that some of the less efficient units reduce their carbon footprint.

According to the new policy, farmers have to pay an additional price of Rs 14 a bag of neem-coated urea. The movement plan for urea would continue to be given by the government every month to urea suppliers.

The current MRP of urea is Rs 268 for every 50 kg bag excluding local levies. The price of the fertillser saw the last major revision (10%) in early 2010. In case of the other two key fertilisers – P and K-  the   subsidy is capped.

India’s urea production has remained stagnant at 22 million tonnes annually and the country imports about 8 million tonnes annually to meet the domestic demand.

Savings in energy shall reduce the carbon-footprint and would thus be more environment friendly. Urea units would adopt best available technology in the world and will become globally more competitive.

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