New Delhi, Feb 18: The government on Thursday approved a 10 per cent increase in urea prices and partially eased controls over other fertilisers.
 The hike was announced by Information and Broadcasting Binister Ambika Soni, after a Cabinet meeting.
 Prices of urea would rise by Rs 483 per tonne from April 1, the minister said.
 Currently, Indian companies sell fertilisers at a fixed price to farmers and not according to manufacturing cost. The government compensates for the losses by way of subsidies.
 The annual fertiliser subsidy is estimated at around Rs 70,000 crore in the current financial year and calls for cutting subsidy cost have prompted the government to explore the possibility of de-controlling prices — a decision that could have political repercussions.
 After the decision comes into effect, companies will sell urea at the higher — though still fixed — price, which translates into the need for fewer subsidies by the government.
 Prices of some fertilisers like P&K have been de-controlled, Soni said.
 After the news, the stocks of major fertiliser company moved up.
 Finance Minister Pranab Mukherjee, who will present the annual Budget on February 26, is expected to lay down a roadmap for rationalising oil and fertiliser subsidies.
 Subsidy from April 1 would also be given on a nutrient-based scheme basis — depending on the nutrients (nitrogen phosphorus, potassium, etc) in the product — rather than the product itself.
 Cutting the fertilizer subsidy was a political challenge for the government as not just farmers but even the Fertiliser Minister, DMK’s MK Aligiri, was opposed to the move.
 While there may not be an immediate impact for fertiliser companies as the government has got assurance from them that prices won’t be hiked in the current season, the 10% hike in urea prices — though lower than the 30% increase sought by the industry — and a move to the more rationally thought-out NBS signals a political will to reform the fertiliser policy further.
 US Jha, CMD of Rashtriya Chemicals & Fertilisers, welcomed the government move but added there won’t be any improvement in margins for the company.
 He added that he does not expect prices of phosphorus- and potassium-based fertilisers to be de-controlled immediately.
 The government’s decision to amend its fertiliser policy to encourage nutrients-based fertiliser will help improve farm productivity, US Awasthi, managing director of the Indian Farmers Fertiliser Cooperative, the country's top fertiliser maker.
IANS

Lastupdate on : Thu, 18 Feb 2010 21:30:00 Makkah time
Lastupdate on : Thu, 18 Feb 2010 18:30:00 GMT
Lastupdate on : Fri, 19 Feb 2010 00:00:00 IST