India has eased controls on several fertilizers and raised prices of the popular urea nutrient by 10 per cent, raising hopes of more reforms, lower subsidies and higher margins for producers.
The government, facing protests against soaring food prices, has cautioned fertilizer firms that if prices rise sharply, it will reimpose controls to protect farmers as soil nutrients account for 30 per cent of farming costs.
“The government has reserved the right to intervene, to protect the interests of farmers,” Information and Broadcasting Minister Ambika Soni told reporters after the cabinet approved the policy, which will fix the subsidy for specific nutrients, replacing an ad hoc system.
Easing controls on the price of fertilizers other than urea will help the government cut fiscal deficit, which rose to 6.2 per cent of GDP last year, partly because of fertilizer subsidy, which rose to 758.49 billion rupees (US$16.4 billion) in 2008-09.
Fertilizer Secretary S. M. Krishnan said the subsidy in 2010-11 would not be higher than the previous year.
Finance Minister Pranab Mukherjee, who will present the annual budget on Feb. 26, is expected to lay down a road map for rationalizing oil and fertilizer subsidies.