Govt decided not to revise the maximum retail price (MRP) of Urea.
Even though the cost price of urea has gone up by 50–80% in the past year, the government has decided not to revise the maximum retail price (MRP) of urea. Also, almost 40% of the subsidy money set aside in the budget for this fiscal year has already been used up in the first three months.
When BusinessLine asked if there were any plans to change the MRP in light of high prices and higher subsidies, a high-level government official said no. A person with a lot of power in the fertilizer business said, ‘The price of urea has gone up to nearly ₹45,000 per tonne from ₹25,000–30,000 per tonne last year.
The cost has gone up because the price of natural gas has gone up.’ On the Fertiliser Department’s website, it says that the country has 32 urea units, 30 of which use natural gas (domestic gas, LNG, or CBM), and the other two use naphtha as a feedstock.
The last change was in 2010
The last change was made more than 12 years ago, when the government decided to raise the MRP of urea from ₹4,830 to ₹5,310 per tonne as of April 1, 2010. At the moment, a 50-kg bag of urea costs ₹268, and a 45-kg bag costs ₹242.
This includes the dealer margin of ₹354/tonne for private traders, PSUs, and cooperatives, as well as the extra incentive of ₹50/tonne paid to retailers for acknowledging the receipt and reporting the stock in mFMS (iFMS).
The most tonnes of all the fertilizers used in the country are tonnes of urea, and unlike other categories, the MRP is set by law by the Centre. The MRP doesn’t include taxes or fees for neem coating. The government gives a subsidy to the fertilizer manufacturer/importer for the difference between the cost of fertilizers delivered to the farm gate and the MRP that the farmer has to pay. Fertilizers that don’t contain urea get subsidies from the government based on how much of each nutrient they contain.
In this year’s budget, the government subsidized urea with more than ₹63,000 crore and nutrient-based fertilizers with more than ₹42,000 crores. According to information from the Controller General of Accounts, the government spent about ₹25,000 crores on urea subsidies in the first three months of the current fiscal year.
This is about 39% of the budget. In the same time period last year, it paid out more than ₹11,400 crore, which was 19% of the budget. For the current fiscal year, the government has already doubled the amount it spends on fertilizer subsidies.
Bhagwanth Khuba, who is the Minister of State for Chemicals and Fertilizers, said that 179 lakh tonnes of urea are needed for the Kharif season at the end of the Parliament’s monsoon session. Before each cropping season starts, the Department of Agriculture and Farmers Welfare (DA&FW) works with all the State Governments to figure out how much fertilizer each State and each month will need.
Based on what is expected to be needed, the Department of Fertilisers gives each State the right amount of fertilizers through a monthly supply plan and keeps an eye on the availability.