Industry stamps new urea pricing model, gradual shift in regime
The industry has endorsed a new urea pricing model being considered by the govt, clearing the decks for a gradual freeing up of the retail price of the most-used fertiliser in the country.
By Prabha Jagannathan, ET Bureau | Updated:
NEW DELHI: The industry has endorsed a new urea pricing model being considered by the government, clearing the decks for a gradual freeing up of the retail price of the most-used fertiliser in the country.
The model was worked out by an expert panel led by Planning Commission member Saumitra Chaudhuri, set up to go into the modalities of bringing the cheapest fertiliser under the nutrient-based subsidy (NBS) scheme.
The plan is likely to be firmed up soon and presented to the committee of secretaries, set up by the government to consider the issues of fertilizer subsidy and urea pricing.
The secretaries' panel is expected to endorse the proposal early next week and forward it to the relevant group of ministers (GoM) under finance minister Pranab Mukherjee for vetting before it goes to the cabinet committee on economic affairs for final clearance.
The GoM could be held as early as next week, given the need to reduce expensive urea imports, a government official told ET. The proposal envisages an up to 10% increase in urea prices from its current level of 5310/tonne. The government had, last year, raised urea prices by 10% after several years of freeze, a clear indication of the political sensitivity of the issue.
"We don't think a formal announcement or moving the paperwork is likely to happen until after elections in key states such as Tamil Nadu, Kerala, West Bengal and Assam are over," said Tarun Surana of Sunidhi Securities & Finance.
At a meeting with fertiliser secretary Sutanu Behuria on Thursday, the industry agreed on a proposal to increase the subsidy to about 4,600/tonne. The industry also agreed to pool gas at the FICC ( Fertilizer Industry Co-ordination Committee) level to ensure that gas prices are even across the board to all gas-based urea units.
Less efficient producers are likely to be given five years to bring their energy use on par with more efficient units, with phased reduction of higher subsidy for gas.
That apart, additional subsidy will be provided to naphtha, furnace oil and LSHS-based urea units, which are less cost efficient, for a period of two years until they switch to gas for feedstock in 2012-13.
Not freeing up farmgate price for any longer will mean higher reliance on expensive imports to the immense disadvantage of domestic units. Besides, it will defeat the objective of balanced fertilisation espoused by the nutrient-based subsidy scheme.
Cheap urea was the most consumed fertiliser in the one year of the NBS, the period between April 2010 and March 2011. The good monsoon last year also led to higher consumption.
The model was worked out by an expert panel led by Planning Commission member Saumitra Chaudhuri, set up to go into the modalities of bringing the cheapest fertiliser under the nutrient-based subsidy (NBS) scheme.
The plan is likely to be firmed up soon and presented to the committee of secretaries, set up by the government to consider the issues of fertilizer subsidy and urea pricing.
The secretaries' panel is expected to endorse the proposal early next week and forward it to the relevant group of ministers (GoM) under finance minister Pranab Mukherjee for vetting before it goes to the cabinet committee on economic affairs for final clearance.
The GoM could be held as early as next week, given the need to reduce expensive urea imports, a government official told ET. The proposal envisages an up to 10% increase in urea prices from its current level of 5310/tonne. The government had, last year, raised urea prices by 10% after several years of freeze, a clear indication of the political sensitivity of the issue.
"We don't think a formal announcement or moving the paperwork is likely to happen until after elections in key states such as Tamil Nadu, Kerala, West Bengal and Assam are over," said Tarun Surana of Sunidhi Securities & Finance.
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At a meeting with fertiliser secretary Sutanu Behuria on Thursday, the industry agreed on a proposal to increase the subsidy to about 4,600/tonne. The industry also agreed to pool gas at the FICC ( Fertilizer Industry Co-ordination Committee) level to ensure that gas prices are even across the board to all gas-based urea units.
Less efficient producers are likely to be given five years to bring their energy use on par with more efficient units, with phased reduction of higher subsidy for gas.
That apart, additional subsidy will be provided to naphtha, furnace oil and LSHS-based urea units, which are less cost efficient, for a period of two years until they switch to gas for feedstock in 2012-13.
Not freeing up farmgate price for any longer will mean higher reliance on expensive imports to the immense disadvantage of domestic units. Besides, it will defeat the objective of balanced fertilisation espoused by the nutrient-based subsidy scheme.
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Cheap urea was the most consumed fertiliser in the one year of the NBS, the period between April 2010 and March 2011. The good monsoon last year also led to higher consumption.
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