Fertiliser makers want govt to raise urea price

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SME Times News Bureau | 21 Sep, 2012
Fertiliser producers Thursday urged the government to cut the subsidy on urea and raise the same on phosphate and potash-based fertilisers for a balanced use of soil nutrients in the country.

"The huge price differential has led to the indiscriminate use of urea, resulting in imbalanced fertigation," said A. Vellayan, Fertilisers Association of India (FAI) chairman, warning that the effect of such imbalanced usage comes with a time-lag and food production would be impacted in a year or two.

Vellayan said urea prices should be gradually increased over the next two years. A 70 percent rise in urea prices would help the government save annual subsidy of up to Rs.15,000 crore.

Currently the subsidy on urea is 80 percent. This, he said, can easily be brought down to 40 percent.

The FAI said the savings in subsidy by increasing the urea price may be disbursed to phosphate and potash fertilisers.

It said an increase in urea price would lead to a balanced use of fertisers by farmers.

"Increase in agricultural productivity depends upon the balanced use of fertilisers. Balanced fertilization, in turn, mainly depends upon the prices of fertisers."

According to the association, the best way to bring rational price parity in prices of all nutrients is to move to a policy regime where subsidy is a fixed amount per kilogram of nutrient for all nutrients and in all fertiliser products, and price floats in line with market prices.

The association said urea should be brought under the nutrient based subsidy (NBS) scheme with a clear commitment by industry that urea price will not increase beyond a reasonable limit.

According to FAI, in two to three years subsidy for all nutrients should to be fixed in a manner which enables natural market driven parity in selling prices of all fertilisers.

Rakesh Kapur, joint managing director of Indian Farmers Fertiliser Cooperative Limited (IFFCO), said the use of urea had increased because of subsidised pricing. "It is hitting the concept of balanced fertilisation."

The demand for urea is estimated at 30 million tonnes, growing at three percent annually.