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Urea Production Cost: The production cost of urea has not been increased since 2000 and now the government has decided to increase it. The Fertilizer Secretary has said that a decision on production cost can be taken by the end of the year.
New Delhi. The government is soon going to change the cost of urea and its related products, the most used fertilizer in the country. Fertilizer Secretary Rajat Kumar Mishra said the government is planning to increase fixed cost payments to 30 gas-based urea producers by the end of this year. He also addressed the concerns of the fertilizer industry that there has been no change in the cost for almost 25 years.
Speaking at an event of the Fertilizer Association of India (FAI), Mishra said fixed costs, which include salaries and working capital requirements including plant maintenance, have remained the same despite high inflation since 2000. Therefore, they are planning to increase the cost of products after about 25 years. We are going to decide very soon. I hope this happens very soon and it is believed that we will be able to decide before the end of the year. However, the Ministry will take this decision at its own level and Cabinet approval will not be required for this.
What will be the effect of the decision?
Although it is not yet clear whether the increase in the production cost of urea based fertilizers will affect the farmers or not, it is certain that due to the increase in cost, its market price will also increase. To save the farmers from this, the government may have to increase the scope of its subsidy. Obviously, if farmers are saved from the impact of increased prices, the government will have to compensate for it from its treasury.
How much subsidy is there on urea now?
You will be surprised to know that the Government of India gives bumper subsidy on urea in the country, only then the farmers get it at such a cheap price. In fact, the manufacturing cost per bag of urea is Rs 1,635, while farmers get it for just Rs 266. This means that the government gives a subsidy of Rs 1,369 for one bag of urea. If seen simply, the government bears 80 percent of the total cost of urea, so that the burden does not fall on the farmers. The government has talked about subsidy of about Rs 2 lakh crore for the current financial year.
60 percent of some fertilizers are urea only.
The interest of farmers in the country is directly linked to urea. Only 50 to 60 percent of the total fertilizer used by farmers is urea. If the price of its bag increases to Rs 400 to Rs 500, then the cost of cultivation per acre will also increase to Rs 2.5 thousand. This will affect 85 percent marginal or small farmers. The productivity of crops may also reduce by 8 to 15 percent.
