Govt to hike fert subsidy to protect farmers from high prices

New Delhi, Feb 15 (PTI) The government''s fertilisersubsidy bill is likely to rise by about Rs 9,000 crore nextfiscal as it has decided to absorb high global prices toprovide farm nutrients at affordable prices and contain highfood inflation.

The group of ministers, headed by Finance MinisterPranab Mukherjee, today decided to increase the subsidy tokeep prices of key fertilisers at reasonable levels.

"Given (that) the global prices have risen, MRP should bemaintained at a reasonable level. The government will absorbthe burden of rise in global prices by way of subsidising,"Fertiliser Secretary Sutanu Behuria told reporters here afterthe GoM meeting.

"The subsidy level will be increased, so as to maintainfertilisers at affordable prices," he added.

According to sources, fertiliser subsidy bill will go upby Rs 8,000-9,000 crore in the 2011-12 fiscal, as thefertiliser ministry is planning to raise the benchmark priceof urea, Di-ammonium phosphate (DAP)and muriate of potash(MOP) -- based on which, the Centre pays subsidy to fertiliserfirms.

The fertiliser subsidy bill in the Budget for the currentfiscal is pegged at Rs 53,000 crore. However, this is likelyto go up, as the ministry has sought in sync with the firmingof the global fertiliser prices.

India''s fertiliser subsidy stood at about Rs 64,000 crorein 2009-10 fiscal.

The move is aimed at keeping under control the cost ofproduction of farm items, which in turn would help governmentin containing food inflation, which was over 13 per centduring the end of January.

The ministry has proposed the GOM to raise the benchmarkprice of urea to USD 350/tonne from the current USD 280/tonne.

Similarly, benchmark price of DAP is expected to rise to USD580/tonne from USD 450/tonne and MOP price from USD 350/tonneto USD 390/tonne with effect from April 1, sources said.

The global price of DAP is at present ruling firm at USD630 per tonne, while MOP at USD 400-430 a tonne.

Fertiliser subsidy is the difference between thenormative delivered cost of fertilisers and their notifiedselling prices. Subsidy is given to fertiliser manufacturers.

Presently, the maximum retail price (MRP) of urea isfixed at Rs 5,310 a tonne, whereas companies are selling di-ammonium phosphate (DAP) at Rs 9,950 and muriate of potash(MOP) at Rs 4,455 per tonne.

During 2010-11, India is expected to consume 26 milliontonnes of urea, 11 million tonnes of of DAP, five milliontonnes of MOP and 10 million tonnes of various complexfertilisers.

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