Fertiliser subsidy scheme on hold till industry pledges to hold price line for a year

His department tried to extract a promise,“but there was hardly any credible assurance from the industry” making it “quite impossible” to control their prices. Since the worst-hit would be small and marginal farmers,“I still feel that there is a need to discuss the issues further before taking any decision,” he wrote.

Fertiliser Association of India last month gave a “non-committal and vague” response to the ministry and could only assure that price rise in potassic and phosphoric fertilisers would not be more than Rs 30 per bag,provided the government gave subsidy based on higher global prices.

Alagiri’s request — in his first letter to Mukherjee on February 3 — was also that raising urea price by 10 per cent was also “not desirable at this stage in view of the inflationary trends”. The last attempt in 2002 of a 5-per cent raise had to be rolled back after farmers’ unrest,he wrote.

He had suggested that both proposals be kept in abeyance for a year during which pilot project would be launched in key districts and strategic stockpile built to ensure smooth transition to the new proposal.

But Mukherjee on February 12 told Alagiri to take the proposal “as recommended by the GoM to the Cabinet for an early approval” as the new scheme had been carefully worked out to ensure the “affordability as well as availability” of fertilisers to the farmers.

“The country has,in recent years,been faced with a burgeoning fertiliser subsidy bill due to spiraling prices…Continuing with the existing regime would make the situation worse,” Mukherjee wrote,adding that unchanged urea price had resulted in excessive demand that was detrimental to the soil’s health.

However,an unrelenting Alagiri met Mukherjee on Saturday and handed a letter saying that the GoM’s decision — based on concerns raised by agriculture minister Sharad Pawar,heavy industries minister Vilasrao Deshmukh and rural development minister CP Joshi — was to introduce the scheme only on industry assurance of maintaining the price line for a year.

While reiterating his plea for postponing the measures for another year,he told Mukherjee that any cut in subsidy budget would result in scarcity that could result in “farmers’ riots” and an increase in import subsidy on foodgrains due to a fall in domestic output.

On urea price,he said that “any increase at a time when there are protests every where against overall increase in prices of commodities,would further aggravate the situation”.

Sources said that Alagiri thereafter left for Chennai after instructing his ministry not to send the proposal to the Cabinet even though the principal secretary to the Prime Minister had “indicated the necessity of bringing the matter before the Cabinet”.