FY10 subsidy burden seen around Rs 56,000cr: Fert Secy

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In a major reform signal for the fertiliser sector, the Cabinet has approved the nutrient-based fertliser subsidy plan. It has allowed a 10% hike in urea prices and a price decontrol of all other fertlisers. Under the new policy, subsidy will be given to nutrients like nitrogen, phosphorus, potash and sulphur. The government however, will continue to fix the prices of urea.

In an interview with CNBC-TV18, Fertiliser Secretary, S Krishnan, spoke on the government's objective to hike urea prices, and impact on fertiliser prices.

Here is a verbatim transcript of the interview. Also watch the accompanying video.

Q: Could you take us through the intention of the government behind what was announced yesterday in terms of the urea price hike and the change in subsidy for other nutrient fertilizers as well, was the intention to reduce the subsidy burden of the government. What do you expect will be the gain and more importantly what do you expect will be the impact on prices of these companies?

A: The first objective of the government is to the declining response to agriculture productivity and for improving a balanced application of fertilisers.

By introducing this system we expect there will be more availability of innovative fertiliser products at reasonable prices and also we will be able to have more competition at the farm gate because different companies will be able to price their products and compete with each other.

Q: We have feedstock prices or crude oil prices that are pretty reasonable right now. But what if they were to rise a 100% to something to that effect, what happens then and what systems of checks and balances do you have in place to deal with an exceptional increase in feedstock prices?

A: At this point of time what has been decontrolled is phosphatic and pottasic fertilizers which do not require such feedstocks as most of the products are imported. So I do not visualize any direct nexus between the urea prices. But there is a link to the international prices that will have to be addressed.