Government Takes Yet Another Shot At Hiking Prices For Politically Sensitive Urea?

While there still isn’t any clarity on the government’s stance towards de-regulating prices of highly subsidized commodities like urea, diesel, LPG and kerosene, the fertilizer ministry is said to be mooting over the idea of hiking retail prices of urea by around 10 per cent, in a bid to rein down the overall subsidy burden. This comes just after the mayhem that one saw last week, when the domestic oil marketers pushed for some price hikes in retail petrol and diesel prices, which were suddenly, shot down by the govt.

According to an article in The Economic Times, the proposal to hike urea prices is currently making rounds in the ministry and its seems that it would be implemented only after a final nod from the Cabinet Committee for Economic Affairs (CCEA).

Now if the proposal goes through, one may see prices of urea at the retail level for farmers rise from the current Rs 5310 per tonne to Rs 5841 per tonne. While this would provide some respite to the urea manufactures by helping them earn better sales realizations, the actual positive impact would only be witnessed if and when the prices for urea are deregulated and brought under the purview of the Nutrient Based Subsidy Scheme (NBS).

Under NBS policy the fertilizer manufacturing companies would be powered with the ability to price their products at the global level, resulting in better control over their revenues and profitability. Bringing urea under the NBS and letting market forces decide the retail prices would also help improve the soil nutrient fertility as it will encourage the use of other complex NPK nutrients as well. This will augur well for complex fertilizer manufacturers who in recent times have seen demand for their products get impacted due to the immense price difference between urea and other NPK variants.

However, given the pressure that our government faces not only from the opposition parties but also its very own allies, the chances of such reformist moves are very slim. In fact for a politically sensitive fertilizer like urea, which constitutes nearly 80 per cent of India’s total fertilizer consumption it would be a while before the government actually moots such an action.