Govt clears path for direct cash transfer with 1% fert price hike

The Cabinet committee on economic affairs (CCEA) approved a 1% hike in the price of all fertiliser products as additional retailer's margin and laced the decision with a procedural change to ensure the industry gets the subsidy amount only on actual sales to retailers. The acknowledgement of the receipt from the retailers will be tracked on the ICT enabled mobile Fertiliser Monitoring System (mFMS) and the Fertiliser Monitoring System (FMS), according to a statement. This, sources said, would lead to direct cash transfer of fertiliser subsidy to farmers in due course.

As for controlled fertiliser urea, this would mean an increase in retail price by R50 to R5,360 a tonne.

The CCEA hasn't considered a proposal, pending for long, for 10% increase in urea price, as a first step before its eventual decontrol.

The fertiliser industry had demanded at least 40% hike in the urea prices to correct the massive price difference between urea and non-urea fertilisers.

A senior fertiliser ministry official said Thursday's hike in fertiliser prices was to expand the retailers' margin, and to support the move towards eventual cash transfer of fertiliser subsidy to the farmers. Shares of leading fertiliser companies, though, rose between 1-5% on the day. Fertiliser Association of India secretary general Satish Chander told FE: "Cash transfer would definitely help us as well as the farmer. We will not have to rush after the government for getting subsidy payments. Urea pricing will become more transparent."

Meanwhile, a new urea investment policy, which is meant to attract billions of dollars of investment to the sector to bridge the rising demand-supply gap and reduce reliance on expensive expensive of the fertiliser, is in limbo.

As FE reported earlier, the latest thinking is to limit the policy which entails subsidised LNG/gas to investors is limit the incentives to brownfield expansions. This is because it is reckoned that the subsidy entitlement for greenfield plants would be about $20 a tonne more than that for existing units wanting to expand.

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