An exclusive report carried by the daily newspaper Indian Express says that the Modi govt is working on a three-year plan to deregulate urea fertiliser. The govt will simultaneously permit duty free imports without any canalisation or restrictions and credit the subsidy directly into the bank accounts of farmers, the report says.
India is on the cusp of a digital revolution that will cover land records, soil health cards, bank accounts under the Jan Dhan Yojna with Aadhaar numbers enabling the govt to transfer subsidy directly and remove all MRP and import restrictions, govt. officials are quoted as saying the Indian report says.
The proposed deregulation plan may be announced in the coming Union budget for 2015-16. “Simultaneously, we could also raise the MRP by, say, 20 per cent annually for the next three years. This can be in two instalments of 10 per cent each before the kharif and rabi season of every year, so that the MRP is closer to Rs 9,500 a tonne (Rs 475 per bag) even before decontrol happens,” an official said.
Since April 1, 2010, when a nutrient-based subsidy (NBS) regime was introduced, the prices of all non-urea fertilisers — which are already decontrolled — have shot up significantly.
In contrast, the Centre has raised the MRP of urea only marginally, from Rs 4,830 to Rs 5,360 a tonne. Urea has been kept out of the NBS, under which firms are paid a fixed subsidy for every tonne of fertiliser based on nutrient (nitrogen, phosphorus or potash) content even while being free to set MRPs.
Urea constitutes roughly 55 per cent of India’s total fertiliser consumption, making its decontrol all the more difficult politically. Out of the Centre’s fertiliser subsidy of Rs 72,970.30 crore budgeted for 2014-15, Rs 48,300 crore is on account of urea.
The plants with high costs will obviously shut down if the sector is thrown open to competition. We want to avoid that to the extent possible,” the officials noted. The difference in costs arises from two factors. The first is feedstock costs that are low for plants running on domestic gas at $5-6 per million British thermal units (mBtu), as opposed to those using imported regasified liquefied natural gas at $14-15.
The second is energy consumption. There are 14 plants that require only 5-6 gigacalories (Gcal) to produce one tonne of urea, whereas 10 consume 6-8 Gcal and the remaining more than 8 Gcal. “We are proposing a pooling mechanism, under which all producers get gas at a uniform average price.
Three years, officials feal, is “reasonable time” for full decontrol, both from a farmer and industry standpoint. The former chairman of the Commission for Agricultural Costs and Prices Ashok Gulati, however, feels three years is too long. “Gas price pooling is an administrative decision that can be taken today. And why protect units with high energy consumption at all? These are anyway old, fully-depreciated plants that have already recovered their capital costs,” he says.
It should be noted, however, that the largest farmers’ cooperative IFFCO has been demanding urea decontrol in practically all conferences. Its MD Dr U S Awasthi recently demanded urea-decontrol reported in these columns. Hope the process of decontrol is painless and farmers are not subjected to greed of black-marketers in the transition phase.