New Delhi, Jun 14 (PTI): The government on Thursday deferred the Fertiliser Ministry's proposal to increase the retail prices of urea by 10 per cent to Rs 5,841 per tonne for the 2012-13 fiscal.

“It (the proposal on urea price increase) has gone back to the ministry. They have to take a second look at it,” Home Minister P Chidambaram told reporters after a meeting of the Cabinet Committee of Economic Affairs (CCEA).

Sources said some ministries have opposed the proposal as farmers are already bearing the brunt of a sharp increase in prices of phosphatic (P) and potassic (K) fertilisers.

The proposal to increase urea price will be re-examined by the group of ministers (GoM) headed by Finance Minister Pranab Mukherjee, they added.

Urea is the only fertiliser that remains under full price control. Its current retail price is Rs 5,310 per tonne. The proposal to hike urea prices was made to redress imbalanced use of soil nutrients and reduce the subsidy burden of the government.

The government mainly provides subsidy on fertilisers, fuels and food. The difference between the cost of production and the maximum retail price (MRP) is paid to manufacturers.

In 2011-12, urea is estimated to have contributed Rs 24,500 crore to the fertiliser subsidy bill.        To encourage balanced use of fertiliser, reduce its subsidy burden and to compensate companies of rising input costs, the Fertiliser Ministry had proposed to modify the New Pricing Scheme (NPS) Stage-III instead of decontrolling the urea sector, which has been opposed by various ministries.

Earlier, the government had plans to decontrol the urea sector by bringing it under the nutrient based subsidy (NBS) scheme. A committee headed by Planning Commission member Saumitra Chaudhary had also suggested freeing of the sector.

However, the proposal hit a road block as the Fertiliser Ministry, among others, opposed it in view of rise in retail prices of phosphatic (P) and potassic (K) fertilisers after they were decontrolled in April 2010.

High prices of P and K fertilisers prompted farmers to use more of urea, which is cheaper, thus causing an imbalance in use of soil nutrients.

According to the industry, the annual demand for urea in the country is around 28 million tonnes, of which 22 million tonnes is indigenously produced and the rest is imported.