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Govt Allows Direct Subsidy Transfer, Hikes Urea Price

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In a move, calculated to help the government reduce its fertiliser subsidy bill, the Union Cabinet on 11 October decided to increase the prices of urea-based fertilisers by Rs 50 per tonne. Earlier, urea was priced at Rs 5,310 per tonne.

Concerned over rising subsidies, the finance ministry had asked the fertiliser ministry to expedite the proposal to hike urea prices last month. The government controls urea price and its distribution and pays heavy subsidy to producers to make sure farmers get the crop nutrient at a lower price.

The Union Cabinet also cleared direct transfer of cash subsidy to farmers for procuring urea.

“The Cabinet Committee on Economic Affairs has approved that the payment of fertiliser subsidy to companies will be based on the receipt of fertilisers, and the acknowledgement of receipts of fertilisers by the retailers (last point of sale of fertilisers),” a  government release said
 
Now, the payment of fertiliser subsidy to companies will be based on the receipt of fertilisers and the acknowledgement of receipts of fertilisers by the retailers (last point of sale of fertilisers). The acknowledgement of the receipt will be tracked on the ICT-enabled mobile Fertiliser Monitoring System (mFMS) and the fertiliser Monitoring System (FMS). A part of the subsidy will be paid on receipt of fertilisers in the district to the companies.
 
In 2011-12, urea consumption in India stood at 29 million tonnes compared to 28.2 million tonnes a year  earlier. India imported 7.83 million tonnes of urea in 2011-12 compared to 6.6 million the previous year.  The urea subsidy stood at Rs 24,500 crore. In June, the Cabinet Committee of Economic Affairs had deferred the decision on urea price increase and had asked the Ministry to make certain changes in view of opposition from various quarters.

The move sent fertiliser stocks soaring more than 5 per cent. Chambal Fertiliser and Rashtriya Chemical Fertiliser shot up 5-6 per cent. Madras Fertiliser and National Fertiliser too gained 5-6 per cent.


 


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