New Delhi, October 11
Aiming to shift towards direct transfer of fertiliser subsidy to farmers, the government today marginally increased the retail price of urea to incentivise retailers to provide receipt of fertiliser stock received by them for sale. The price of urea has been increased by Rs 50 a tonne, increasing it from Rs 5,310 a tonne to Rs 5,360 a tonne.

The marginal increase of about 1 per cent may earn the government some ire of farmers, but the industry termed it a positive move, which would result in greater transparency in the movement of urea and help divert it from black-marketeers to the farmers.

Sources say the initial proposal was to hike urea price by at least 10 per cent, but the government decided against it, fearing resistance from allies and political backlash from the Opposition. The industry had, in fact, been clamouring for a minimum 40 per cent increase to check overuse of this highly subsidised fertiliser.

Officials say the CCEA decision to increase the MRP of urea by Rs 2.50 per bag or Rs 50 per million tonne was meant as an incentive to dealers. Also it held no positives for the fertiliser companies because Rs 50 increase would not mobilise more than Rs 100-120 crore.

The hike will be passed on to retailers as an incentive for posting receipts in the modified system while framers will pay about 5 paise a kg more. The price hike is for the acknowledgement of fertiliser that a dealer has received from the manufacturer or importer or wholesaler, they add.

The move comes in the context of phased implementation of the project for direct transfer of subsidy to farmers. “The retailers are supposed to acknowledge the receipt of the fertilisers either through the SMS-based application or through the web application.

This phase is currently getting consolidated and will lead to the greater transparency in the movement of fertilisers and availability at the farm gate. It also aims to prevent black marketing and use of subsidised urea for industrial purpose,” officials say.

The increase will not have much impact on the annual urea subsidy bill, nor will it affect the balance sheets of the industry significantly. Despite this, fertliser stocks gained strength, perhaps in anticipation of some long-term reform in future.

The fact is that high subsidy has led to farmers excessively using urea, resulting in an imbalance with low usage of non-urea fertilisers - P (phosphate) & K (potash), which were decontrolled in April 2010. Prices of di-ammonium phosphate (DAP) have gone up since the introduction of the nutrient-based subsidy (NBS) regime after decontrol of prices of the two ferlisers. But urea prices remained constant while the government increased subsidy on it.

Meanwhile, the Department of Fertilisers will also be carrying out pilot projects in 10 districts for information visibility on sale of fertilisers to the farmers.