Government Reduces Bag Weight for Urea Gold, Fixes Price At Rs 266.5 Per Bag

The government has taken a step regarding its Sulphur-Coated Urea, Urea Gold. After its unveiling six months ago, the government has opted to fix the price of Urea Gold by reducing the bag's weight, keeping the cost consistent with conventional urea at Rs 266.5 per bag. However, this decision comes with a catch, as the net weight of Urea Gold is now set at 40 kg, compared to the traditional 45 kg, resulting in a nominal increase of about Rs 30 per bag.

The move to fix the price of Urea Gold by adjusting the bag's weight aims to bring stability to the pricing dynamics of fertilizers. By maintaining the cost per bag at Rs 266.5, the government seeks to balance market demands while addressing challenges related to the increased production cost of Sulphur-Coated Urea.

Impact on Farmers and Urea Sales

The decision to reduce the net weight of Urea Gold has raised concerns regarding its impact on farmers accustomed to the 45 kg packaging of conventional urea. Officials argue that retaining the 45 kg packing could have resulted in higher prices for Urea Gold, and the five kg reduction might inadvertently affect overall urea sales as farmers follow a per-bag application practice.

The Cabinet Committee on Economic Affairs (CCEA) approved the launch of Sulphur-Coated Urea on June 28, 2023, to address soil sulphur deficiencies. This decision adds context to the recent weight adjustment, emphasizing the government's commitment to addressing agricultural challenges through innovative fertilizer solutions.

The fertilizer market landscape, particularly for urea, has seen fluctuations in recent months. Despite a modest 3.3 percent rise in urea consumption (excluding nano-urea) from April to November 2023, reaching 239.69 lakh tonnes, the government's decision comes against the backdrop of a 19 percent drop in urea sales in November. The move to adjust Urea Gold's bag weight becomes pivotal in the context of these market dynamics.

As concerns linger over the potential impact on farmers and overall urea sales, the decision's timing aligns with a 15 percent increase in urea sales in October 2023, driven by farmers stocking up during the Rabi sowing season. The speculation regarding the absence of subsidy for Urea Gold, similar to nano-urea, adds layer of complexity to the government's strategy.

Moreover, with the imported sulphur cost (CFR) experiencing a notable 39 percent decline to $111/tonne in November 2023, the government's decision seems to be influenced by a mix of market conditions, production costs, and broader agricultural objectives.