Fertiliser prices may go up; subsidy bill to
New Delhi, June 18
This seems certain despite strong resistance from within the Congress party, alliance partners and Leftist parties. Union Finance Minister P Chidambaram will not find it easy to fund the required subsidy bill of over Rs 17,500 crore from the Budget after increase in cost of production of fertilisers by around 30 per cent this year.
Sources in the Ministry of Chemicals and Fertilisers said the government may allow fertiliser prices to rise by 10-15 per cent in the open market by not providing adequate subsidy in the Budget.
The average production cost of fertiliser has increased due to increase in naptha and other fuel costs, rise in phospheric acid prices from $ 356 per tonne to $ 402 per tonnes thanks to the cartel of its producers and other input costs.
After above average rains during November-March and expectation of good monsoon, the sales of urea and DPA have already increased by 230 per cent and 280 per cent respectively by June 15 as compared to sales during the corresponding period. The government will soon have to import fertilisers, as after the closure of fertiliser units in Barauni, Durgapur, Sindri, Gorakhpur and Talcher the total fertiliser production capacity has come down to 194 lakh tonnes as against 202 lakh tonnes till recently.
The prevailing high international price of urea, DPA and other fertilisers are further expected to firm up due to strong demand from India and China this year.
Union Minister for Chemicals and Fertilisers has proposed to the Finance Minister to increase the subsidy bill by Rs 5000 crore from previous year’s bill of Rs 12,500 crore to keep prices under control.
Interestingly, the ministry has pointed out that it will have to pay subsidy bills of around Rs 1500 crore pending for the last fiscal year. After increase in fertiliser prices, it has claimed, the previous government instead of raising subsidy support, decided to defer the payment to fertiliser units for this fiscal year.
Lamenting the government’s ad hoc policy, Prof Karam Singh, senior agricultural economist from Punjab Agricultural University said: “The government will have to take long term measures as part of empowerment of farm sector under WTO provisions, like closure of inefficient plants, price stabilisation fund to meet fluctuations in the international prices and encouraging R&D for optimal utilisation of fertilisers in the agricultural sector.”