Free pricing of urea to rationalise use: Panel

NEW DELHI: A committee set up by the government has suggested freeing the prices of urea and inclusion of the fertiliser in the new nutrient-based subsidy scheme to discourage its excessive use, stem soil degradation and reduce government subsidy.

The panel, led by former agriculture secretary T Nanda Kumar, also recommended a “comparatively higher level” of subsidy for critical nutrients like sulphur, zinc and boron to make them affordable to farmers.
The nutrient-based subsidy scheme, or NBS, currently includes nitrogen, phosphorous, potash and complex fertilisers. Its underlying concept is equal subsidy for the same nutrient in any form, either as a straight fertiliser or as a complex one.

Industry lobby Fertiliser Association of India director-general Satish Chandra welcomed the proposal but was guarded in his reaction. “These (recommendations) have been made by other panels earlier,” he said, an indication that a decision on this politically sensitive issue will not be easy.

The committee submitted its report to the Cabinet secretary last week, five months after it was set up to suggest ways to optimise the use of fertilisers to boost agriculture productivity. The 80-page report has recommended that the NBS be urgently operationalised for all approved fertilisers, including urea.

Fertiliser subsidy is pegged lower at Rs 49,980.73 crore this fiscal year from Rs 52,980.25 crore last year on the premise that it would drop in the NBS regime.

Keeping urea, a key source of nitrogen, out of the NBS has led to heavy use of the cheapest fertiliser in the first three months of the policy, defeating its objective of balanced use of nutrients.

“Barring urea from the NBS is confusing since the scheme was meant to encourage balanced fertilisation,” Mr Chandra said, adding that the government should have a road map for urea with separate subsidy levels for gas-based urea plants and naphtha-based plants.

The government has said that urea will be included into the policy later, but has not indicated a time frame.
Mr Chandra said if the government wants, urea can be brought under the NBS even from this rabi season. The Nanda Kumar committee, however, suggests a phased rollout due to paucity of time.

The Centre could take up site specific nutrient management initially in the 100 districts, which consume 50% of NPK fertilisers, followed by the districts that have major soil degradation.

When the NBS scheme was introduced in April, subsidy for indigenous and imported P&K fertilisers was announced on an annual basis for 2010-11, based on the prevailing fertiliser prices and price trends in the international market. That allowed the private sector to clinch imports at attractive prices while domestic competition was expected to keep prices affordable to farmers.

The Centre plans to amend the new pricing scheme for urea to determine the quantum of urea subsidy, although the industry has demanded inclusion of urea in the NBS and free imports either within or outside the scheme.
Imports through parastatals alone have meant that the Centre buys urea at prices ranging between Rs 7,000 and Rs 30,000 a tonne.

The panel, which included secretaries of agriculture, fertiliser, finance and expenditure, has also suggested direct cash transfer to farmers.