Govt mulls hiking urea price by 10%

The government is considering increasing the retail price of urea, a key fertilizer, by 10% to reduce its subsidy burden in the current fiscal.

Urea is the only fertilizer that remains under full price control. Its current retail price is Rs 5,310 per tonne. "The fertilizer ministry is looking at increasing retail price of urea by at least 10% to Rs 5,841 per tonne to bring down its subsidy burden," a source in the know said.

The final call on this issue will be taken by the Cabinet Committee on Economic Affairs (CCEA).

Last year, a panel of ministers headed by Finance Minister Pranab Mukherjee had approved a draft urea policy that proposed partial freeing of retail prices and allowing companies to hike urea rates by 10% in the first year of the policy implementation.

The government mainly provides subsidy on fertilizers, fuels and food. The difference between the cost of production and the maximum retail price is paid to manufacturers.

In 2011-12, urea is estimated to have contributed Rs 24,500 crore to the fertilizer subsidy bill.

Concerned over the huge subsidy burden due to fertilizer, the committee of secretaries headed by Planning Commission member Soumitra Chaudhury had proposed complete deregulation of the urea sector.

However, the proposal was not accepted by the ministries of finance, agriculture and fertilizer. Due to rising fiscal deficit, the finance minister in his Budget speech had said the government will bring down expenditure on major subsidies.

The country's urea production is stagnant at around 21-22 million tonnes and about 7-8 million tonnes is being imported to meet the domestic demand.