Urea Subsidy Projections for FY24: Below Rs 1-lakh cr Against BE of Rs 1.31-lakh cr

"We may be able to keep the urea subsidy under one lakh crore in the current fiscal," as per Fertilizer Secretary Arun Singhal. According to him, the overall fertilizer subsidy will be lower than the Budget Estimate. The urea subsidy is anticipated to be Rs.1.31 lakh crore during 2023-24. According to officials, the last tender for imported urea was $330/tonne (f.o.b. China), down from an average of $475 in February and $665 in October 2022.

Following a recent Cabinet decision, the price of domestic natural gas on a gross calorific basis (GCV) for the period 8-30 April has been set at $7.92 per million British thermal units (mBtu). Furthermore, for gas produced by ONGC/OIL from their nomination fields, the above-mentioned administered price mechanism rate is subject to a ceiling of $6.50 per mBtu on a GCV basis for the same time. Prior to the change, the price was $8.57.

Though the fertilizer industry is the largest consumer of local natural gas, accounting for 29% of total consumption, present supply only covers 15% of the industry's needs; the remainder is fulfilled through imports. Nonetheless, the government predicts that a $1 decline in petrol costs will help fertilizer firms to the tune of Rs 1,000 crore.

On April 7, the Cabinet Committee on Economic Affairs (CCEA) approved revised domestic natural gas pricing guidelines for gas produced from state-run ONGC and OIL nomination fields, New Exploration Licencing Policy (NELP) blocks, and pre-NELP blocks where the Production Sharing Contract (PSC) requires government approval of prices.

As a result, the price of such natural gas will be 10% of the monthly average of the Indian crude basket and will be announced on a monthly basis. Singhal further stated that the nutrient-based subsidy for Kharif 2023 would be released within the next month. Experts predict a significant fall in subsidies from Rabi 2022 levels of 98.02/kg for nitrogen, 66.93/kg for phosphorus, 23.65/kg for potash, and 6.12/kg for sulphur.

According to the Fertilizer Secretary, the government has taken many initiatives to reduce chemical fertilizer consumption by encouraging alternatives such as bio-fertilizers. "The PM-PRANAM scheme, as announced in the Budget, will be implemented soon." We are also developing a policy to encourage the usage of organic manure. In addition, the agriculture ministry has various other programmes aimed at lowering the usage of artificial fertilizers," Singhal explained.

The Centre will grant 50% of the subsidy amount saved by a state due to a reduction in chemical fertilizer consumption under PM-PRANAM. However, the government is likely to exclude nano-urea and nano-DAP from this scheme, despite the fact that both are chemical fertilizers, in order to protect their sales. The government does not yet provide any subsidies for nano-urea or nano-DAP.