The move will reduce subsidy component by Rs. 900 crore

Following the go ahead by the Election Commission, the Fertilizer Ministry is gearing to move the Cabinet Committee on Economic Affairs (CCEA) seeking approval to reduce subsidy on potash nutrient for 2014-15 fiscal, a move aimed at reducing the subsidy component by Rs. 900 crore.

Officials in the Ministry said that the nod from the EC was received this past week and the Cabinet note for this was ready following completion of inter-Ministerial consultations. The Ministry is looking forward to putting up the Cabinet note before the next meeting of the CCEA to fix subsidy of P&K (Phosphatic and Potassic) fertilisers for next fiscal. It has recommended continued same subsidy component for all the complex fertilizers, barring potash. It has been proposed that subsidy rate of potash will be reduced by Rs. 2,000 per tonne to stand at around Rs. 9,400 per tonne as the rates of this product have come down in the international market.

There has been a constant fall in the global prices of potash over the past few months resulting in availability at $320 per tonne instead of $430 per tonne a year ago. The subsidy on other major complex fertilizer phosphate has been kept at last year's level of Rs.12,350 per tonne as the global prices are stationary.

Potash is normally sold in Indian markets at Rs. 16,000 per tonne, while phosphate is available at about Rs. 22,500 per tonne. In the past one year, the total demand of both potash and phosphate was more than 10 million tonnes. In April 2010, the government decontrolled the P&K (non-urea) fertilizers by giving freedom to the manufacturers to fix maximum retail price (MRP). But, it offers a fixed nutrient based subsidy (NBS) on P&K nutrients to keep domestic rates lower.

However, in urea, the MRP is fixed at Rs. 5,360 per tonne and subsidy keeps changing depending upon on the production cost of domestic urea and landed cost of imported urea.