Govt to raise fertiliser subsidy

New Delhi: Faced with high food inflation, the government on Tuesday decided to increase fertiliser subsidy to absorb high global prices so that the domestic price of urea, Di-ammonium phosphate (DAP)and muriate of potash (MOP) are protected.

The group of ministers, headed by Finance Minister Pranab Mukherjee, today met to review the fertiliser prices.

"The subsidy level will be increased so as to maintain the affordable prices. We are working out the details," Fertiliser Secretary Sutanu Behuria told reporters here.

"Given the global prices have risen, MRP should be maintained at a reasonable level. The government will absorb the burden of rise in global prices by way of subsidising," he added.

The price of DAP in the global market is around USD 630 per tonne and MOP at USD 400-420 per tonne, but the benchmark price at which the government reimburses subsidy to fertiliser companies are USD 450 a tonne and USD 350 a tonne, respectively.

It is feared that inflation, already hight at 8.23 per cent in January, will move up as higher fertiliser prices would increase cost of production of food items.

"We have discussed how the benchmarking of the price should be done so that fertilisers are made available at comfortable price for the Kharif season," Behuria said.

Fertilsier subsidy stood at over Rs 64,000 crore in 2009-10.

Fertiliser subsidy is the difference between the normative delivered cost of fertilisers and their notified selling prices. Subsidy is given to fertiliser manufacturers.