The Hindu Business Line : Fertiliser prices, subsidy allocation unchanged

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New Delhi Feb. 28 Will farmers end up paying more for urea and fertilisers after the coming assembly elections in Uttar Pradesh? Going by the allocations for fertiliser subsidy made by the Finance Minister, Mr P. Chidambram, in his Union Budget, there seem to be reasons for believing so.

For 2006-07, the budget had provided a total Rs 17,252.90 crore as fertiliser subsidy — Rs 10,410.37 crore towards indigenous urea, Rs 1,093.53 crore towards imported urea and Rs 5,749 crore towards decontrolled fertilisers such as di-ammonium phosphate (DAP) and muriate of potash (MOP).

Higher prices

But with global prices of fertilisers as well as feedstock soaring, along with a 10 per cent rise in consumption, the Department of Fertilisers (DoF) estimated the fund requirement for the current fiscal alone at around Rs 28,100 crore. Adding to this, the Rs 5,900 crore carryover payments from the previous fiscal, the actual fertiliser subsidy outgo for 2006-07 was projected at over Rs 34,000 crore by the Department.

As against this, the revised estimates in the budget papers show a total provision of only Rs 22,452.01 crore — Rs 11,400.37 crore towards indigenous urea, Rs 2,703.54 crore towards imported urea and Rs 8,348.10 crore towards decontrolled nutrients. That leaves a gap of over Rs 11,500 crore.

It is possible though that this carryover amount would be made up in the budget provision for the coming fiscal. But again, the budget estimate of fertiliser subsidy for 2007-08 comes to just Rs 22,451.01 crore, which is marginally below even the revised estimate for this fiscal! The provision for decontrolled fertilisers has been reduced by Rs one crore, while those for domestic and imported urea have been retained at the 2006-07 revised estimate levels.

Filling gaps

Indeed, if the Rs 11,500 crore un-disbursed dues of the current fiscal to fertiliser companies get released, barely Rs 11,000 crore would be available as subsidy during 2007-08. This is when the DoF has estimated the fund requirement at current maximum retail prices to touch Rs 31,000 crore, excluding the carryover sums.

There are only two ways of making good the gap. One is to provide more money from the exchequer, which means higher subsidy outgo for the Centre. The alternative is to hike the MRP of fertilisers. This, of course, may not be possible till elections in UP are completed in May, to coincide with the start of sowing for the kharif season. If neither happens, the industry, which sells nutrients at controlled prices and is reimbursed the difference over the higher production cost, would continue to bleed.