The Finance Ministry has asked the Chemicals and Fertilizers Ministry to increase the price of urea and also workout a plan for direct cash transfer of fertilizer subsidy to farmers.

In a letter to the Chemicals and Fertilizers Minister M. K. Alagiri, Finance Minister P. Chidambaram has laid out a roadmap to prune the fertilizer subsidies. In the first place, he urged Mr. Alagiri to work for an increase in the price of urea. This would not only reduce the total subsidy requirements, but also correct the skew between the prices of P&K fertilizers and urea, which results in over-use of urea.

Similarly, it has asked the Ministry to work out a plan for rapid conversion of the existing naphtha-based urea plants into gas-based units. Pointing out that the efficiency of imports by public sector undertakings (PSUs) nominated for import of urea needed considerable improvement, Mr. Chidambaram said alternatives to the existing PSUs might be examined, and an oversight mechanism developed to ensure that urea imports were done more efficiently. On the subsidy for ultimate beneficiaries, Mr. Chidambaram said the direct cash transfer of subsidy was now under examination for the petroleum and food sectors.

“It is suggested that the Ministry of Fertilizers may kindly prepare a concept note for implementation of a direct cash transfer for fertilizer subsidy to the cultivators,’’ the letter added.

The letter by Mr. Chidambaram comes just before the Kelkar Committee submitted its report, and suggested revision in the prices of urea to help restore soil mineral balance and reduce the government’s subsidy burden.

Major fertiliser producers such as IFFCO, Zuari Industries, Coromandel International and Tata Chemicals have backed the Kelkar committee view stating that an upward revision in the prices of the important nitrogenous soil nutrient is the need of the hour. It would help in reducing the price gap between urea and the phosphatic and potassic (P&K) fertilizers. The Kelkar Committee felt that urea price revision was the most urgent reform required on the fertiliser subsidy front.

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