New Delhi, Sept. 26: The finance ministry plans to increase fertiliser prices as part of its effort to put the economy back on track.
North Block has written to the ministry of chemicals and fertilisers asking it to revive a move to increase prices by 10 per cent to cut the Centre’s ballooning subsidy bill.
The Fertiliser Association of India is also believed to be lobbying hard to get urea prices raised by as much as 70 per cent.
Initiated before the presidential polls in July, the exercise could not be carried through because of differences between the minister for fertiliser, who is in favour of a hike, and his deputy.
Officials said the effective hike would be a little over Rs 500 a tonne and could help to cut the subsidy bill by up to Rs 5,000 crore, while discouraging farmers from using too much urea.
Excessive use of this fertiliser has reduced the productivity of large tracts of land in north-west India.
The government has already raised the prices of petrol and diesel and cut the number of subsidised cooking gas cylinders for each family to six a year in a bid to cut down the subsidy bill, which has hit 2.4 per cent of the gross domestic product.
In the last 10 years, the government has raised urea prices just once by Rs 500 a tonne.
Earlier this year, the government had cut the subsidy on phosphate and potash-based fertilisers by up to 30 per cent; officials had at that time made it known that urea subsidy, too, would have to be slashed.
Some time back, the finance ministry had also suggested that urea prices be raised in a staggered manner by 7-10 per cent, every year for the next three years, to address the twin problems of a burgeoning subsidy bill and imbalance in use among various fertilisers.
Last year, the fertiliser subsidy was estimated to cost the government some Rs 67,000 crore.
Though the government has budgeted for Rs 60,000 crore in subsidy this year, the higher prices of imported urea are expected to push the final sum in the region of Rs 75,000 crore.
Officials said the price hike was expected soon as the urea rates have to announced ahead of the Rabi planting season.
FDI in insurance
The finance ministry is also believed to be working on a plan to raise the FDI limit in insurance to 49 per cent from the current 26 per cent.
European and US financial firms have long been lobbying for the hike, and every visiting head of state from the West had made this demand for quite a few years.
The move, which requires a legislative amendment, had been kept on hold as both the Trinamul Congress and BJP had objected to the higher cap.
With Trinamul out of the coalition, the ministry feels the move can be revived.
The proposal will have to be discussed with the Samajwadi Party and Mayawati’s BSP to get their approval or the government may face an embarrassment in Parliament.
The insurance regulatory and development authority (IRDA) amendment bill will also call for allowing Lloyd’s to open an insurance trading floor in Mumbai, somewhat similar to a stock market, and permit foreign reinsurance firms such as Swiss Re and Munich Re to enter India besides giving a green signal to public non-life insurance companies to raise capital by selling minority stakes.
Finance minister P. Chidambaram today met IRDA chief J. Harinarayan. Officially the meeting was on insurance penetration, but sources said the meet was supposed to vet the FDI move before the cabinet took it up for hearing.
Earlier this year, when he was the finance minister, Pranab Mukherjee had said that the bill be introduced in Parliament without the section on foreign direct investment as there was still political resistance.
However, Prime Minister Manmohan Singh had said the bill should be introduced in the House with the provisions on FDI hike.