Indian fertilizer subsidy unchanged, govt plans new urea policy

10 July 2014 13:24 Source:ICIS News

LONDON (ICIS)--In India, the government on Thursday left fertilizer subsidy rates for the current fiscal year unchanged but announced that a new policy for urea will be formulated in the future.

The announcements were made by Finance Minister Arun Jaitley under the first national budget presented by Narendra Modi’s newly elected government.

The fertilizer subsidy level will stay the same as that announced in the interim budget presented in February, at Rs729.70bn for the current fiscal year (April 2014-March 2015). Of the total subsidy, around Rs123bn is allocated for urea imports, Rs360bn for domestic urea and Rs246.7bn for phosphates and potash fertilizers.

Jaitley also announced today that the government will be formulating a new urea policy although he did not give any other details.

The move is expected to address concerns over higher use of urea by farmers compared to phosphates or potash fertilizers as urea is heavily subsidised by the government.

However, the government did not elaborate on how it would tackle the problem of delays in subsidy payments to fertilizer companies. Around Rs300bn worth of subsidies are understood to have been rolled to the current fiscal from the previous fiscal year, with several companies still awaiting subsidy payments.

On 9 July, the government said in its Economic Survey that Rs85bn of its funds are being wasted on urea subsidy, and there is a need to bring the crop nutrient under the Nutrient Based Subsidy (NBS) scheme.

At present, farmers pay a maximum fixed price of Rs5,360 per tonne for urea while the government pays about Rs11,760 per tonne as subsidy for the same quantity to companies that sell the crop nutrient.

The survey has also asked for paying subsidy directly to farmers and said urea’s highly subsidised price leads to unbalanced use of the fertilizer.

By Deepika Thapliyal