Govt forms panel to free urea pricing

Govt forms panel to free urea pricing

New Delhi: Government has formed a panel to study the feasibility of freeing up pricing of the popular urea fertiliser, a minister said on Wednesday, a political minefield that could affect millions of poor rural voters.

In February, Government eased controls on several fertilisers and raised prices of the popular urea nutrient by 10%, raising hopes for lower subsidies and higher margins for producers.

That move also sparked protests from farmers groups and opposition parties who said it would raise costs of production and further impoverish massive rural population.

But easing controls could help cut a urea subsidy bill that is projected at Rs214.8 billion ($4.84 billion) and help rein in a fiscal deficit projected at 5.5% of GDP for the 2010/11 year.

On Wednesday, finance minister m and junior fertiliser minister Srikant Jena met industry lobbies before deciding to form a panel comprising the top bureaucrats of expenditure, fertiliser and agriculture ministries.

“The panel will come back to us after they have formed a view on decontrol (of pricing)," a minister told Reuters on condition of anonymity because the process was still underway.

Shares of fertiliser firms surged on heavy volumes on Wednesday on hopes of a favourable policy announcement on freeing up of pricing of urea.

State-run Rashtriya Chemicals & Fertilisers rose as much as 17.5%, while Chambal Fertilisers & Chemicals Ltd gained 7%.

Fertiliser use in the country is heavily skewed toward urea, a nitrogenous nutrient, reducing farm yields, which are about half of levels in China and Europe, making the country a big buyer of sugar, edible oils and in some years wheat and rice.