In a major jolt to the UPAs fiscal consolidation drive,Fertilisers Minister M K Alagiri has struck down the proposal to raise urea prices by 10 per cent,which would have reduced the subsidy burden by about Rs 2,400 crore.
His ministrys revised note for the Cabinet Committee on Economic Affairs removes a paragraph from the CCEA note of August 2012 which had proposed raising the maximum retail price of urea by 10 per cent during 2012-13.
The new proposal of October 8,2012,says changes in the retail price may be considered from second year onwards to compensate fertiliser units,and that too for increase in pool price of fuels or fixed costs like wages,selling expenses and repair.
Even on these hikes,Alagiri wants final say. The Department of Fertilisers with the approval of the minister,after recommendations from the Inter-Ministerial Council,may decide MRP increase before every financial year, it says.
Last year,a panel headed by then finance minister Pranab Mukherjee approved a new draft urea policy proposing partial freeing of retail prices,allowing firms to hike prices by 10 per cent in the first year of policy implementation.
A committee of secretaries had proposed complete deregulation of the urea sector,but the finance,agriculture and fertilisers ministries opposed this. The Department of Expenditure,then under Mukherjee,also opposed freeing prices but supported a 10 per cent hike every year for three years.
Alagiris move reflects the DMKs position,which had demanded that the Kelkar Committees recommendation,endorsing increase in urea prices by 10 per cent,be shelved. Alagiri wrote to the PM that this would affect farmers,but Finance Minister P Chidambaram recently asked Alagiri to raise the price of urea and work out a plan for direct cash transfers of fertiliser subsidy.