Agriculture ministry for raising urea price

The agriculture ministry has said it is in favour of raising urea prices, leaving the fertilizer ministry as the only arm of the federal government that is opposed to the idea.

Agriculture secretary Ashish Bahuguna has expressed the view in a 28 January note sent to fertilizer secretary Sudhir Mittal. Mint has reviewed a copy of the note.

Bahuguna’s note gains significance as it came less than a week after the government had set up a ministerial panel on urea pricing. The panel is headed by agriculture minister Sharad Pawar and has fertilizer minister M.K. Alagiri, oil minister M. Veerappa Moily and finance minister P. Chidambaram as its members.

In his note, Bahuguna suggests that one way of reducing the “skewed consumption” of urea and non-urea fertilizers, and to reduce price distortion among the same, is by raising the price at which urea is sold.

Urea is the only fertilizer to be sold at a government mandated price of Rs.5,360 per tonne. Companies were allowed to set prices of all other fertilizers in April 2010. Farmers have reduced consumption of non-urea fertilizers after a sharp increase in prices of the farm nutrients and, instead, used more urea in their fields, reducing soil fertility.

“It is understood that international prices of P&K (phosphatic and potassic-referring to non-urea) fertilizers/raw materials have recently decreased substantially. This provides us with an opportunity to reduce the distortion in prices of fertilizers by reducing the prices of P&K fertilizers and simultaneously increasing the price of urea, while ensuring that the overall expenditure incurred by the farmers on the use of fertilizers remains, more or less unchanged,” Bahuguna said in his note.

Mittal, who confirmed that he has received Bahuguna’s note, said that “there are other ministries too, that hold this view.” He declined to comment further as the issue was before the ministerial panel. A phone call and text message sent to Bahuguna remained unanswered.

Two government officials that Mint independently spoke to, said that agriculture ministry officials reiterated this view during an inter-ministerial meeting on 12 February.

The fertilizer ministry has opposed raising the price of urea, which accounts for more than half of fertilizer sales in India, as it will be unpopular among farmers ahead of the national elections that are scheduled next year. Officials say that apart from the agriculture ministry, the expenditure wing of the finance ministry is also in favour of increasing the price of urea.

This comes even as the government is moving towards affecting partial price controls on non-urea prices. Mint reported on 19 February that the government is considering “advising” the fertilizer industry to fix prices of non-urea fertilizers. A draft cabinet note on this has been prepared and is likely to be taken up next week, officials said.

In June last year, a ministerial panel on the issue of urea pricing had moved the issue to the cabinet committee on economic affairs, but the latter could not arrive at a consensus and referred the matter back to the panel. The panel was later dissolved after former finance minister Pranab Mukherjee, who headed the panel, became the President.

The panel was reconstituted in January at the behest of the Prime Minister’s Office.