FAI urges govt to introduce NBS pricing model for urea

Satish Chander, director general of Fertilizer Association of India (FAI), says that till now there is no decision to increase the price of urea, there are only proposals which are under consideration. He also says that the total subsidy stands at Rs 80,000 crore.

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: What impact will 10% hike in urea prices would have when it comes into effect and which companies would get impacted?

A: Till now, there is no decision to increase the price of urea, there are only proposals which are under consideration. If the MRP is increased by 10% the subsidy will come down to that extent. As far as the companies are concerned, they don’t have any bearing on companies.

Q: What are your plans to reduce the current fertilizer subsidy of Rs 60,000 crore in FY13?

A: As per my estimate the total subsidy stands at Rs 80,000 crore.  We consume 58 tonne of urea and the excess we import, if the import prices are higher then the subsidy burden also goes up to similar extent. We are pleading the government to bring reforms in this sector and we would be happy that the subsidy is not rooted through fertilizer industry.

The farmer needs to be helped and direct subsidy can be given and this is what the government policy states. A committee is also working on the same policy direction of the government.

We are pleading with the government to introduce NBS where the subsidy is fixed and any increase in the cost of production is realised through the farmer’s price. So there is no increase in the subsidy once it is fixed under NBS and any increase in cost of production will be realized through higher MRP from the farmer.

Q: Do you think urea price hike is likely anytime soon and also what kind of savings will come in, in terms of a subsidy if 10% urea price hike comes about?

A: The price hike may be a token and a nominal hike. The government needs to take decision on price hike and as a country we should decide as to how much subsidy should be there.