New Delhi, July 12: Price control on urea is slated to be removed by 2005. The department of fertiliser has proposed that the government should continue to fix the maximum retail price (MRP) of urea for another four years and then allow free play to market forces.The department is also planning to fix a single rate of concession across all urea units irrespective of their feedstocks by 2005 and withdraw the concession scheme totally by 2007.While removing price control will take some time, plans are on to remove distribution control on urea within a few months. The department believes that the step will lead to a saving of Rs 700 crore in equated freight subsidy for transportation of urea.The proposals are part of the new fertiliser policy which aims at phased decontrol of the industry to bring it in line with WTO requirements. The pricing policy will be discussed by the committee of secretaries on Thursday after which the entire long term policy will be placed before the Cabinet for clearance.Till price control on urea is removed, the government will increase urea prices periodically to reduce the mounting subsidy bill.The phased dismantling of the retention price scheme is to be initiated by moving over to a group retention price scheme first where units will be compensated on the basis of the feedstock used.According to ministry officials, the department has proposed to give units the benefit of feedstock differential cost reimbursement for the next five years mainly to ensure that efficient naphtha and fuel oil based units get some time to switch over to LNG.Despite continuing with the compensation schemes for the next few years, the government believes that a certain percentage of the indigenous capacity of urea, especially that based on naphtha and fuel oil, may get weeded out when quantitative restrictions on urea imports are withdrawn in April 2001.An assessment of the urea capacity, which is likely to close down, will be made by the government to identify the gap between supply and demand which may be bridged either by creation of new capacities, setting up of joint ventures abroad or by imports.In the case of di-ammonium phosphate (DAP), the department feels that the present strategy of importing one-third of the total DAP requirement and producing the remaining amount has worked well.The strategy will be revised only if the demand-supply scenario, which will be studied in details, reveals the need to change it.The government also has to work out an appropriate import duty structure to protect the industry from a surge of imports. While urea is an unbound item, in the case of DAP amd MOP the government has bound itself to the level of 5 per cent customs duty. If the degree of protection is to be enhanced, negotiations with the initial right holders in accordance with the prescribed WTO procedure will be required.The WTO taskforce constituted by the fertiliser department to find solutions to such problems is expected to hand in its report by the end of next month.
