NEW DELHI: Prime Minister Narendra Modi's government, two sources said, has no plans to remove price controls, a reform that would risk angering farmers. But India can save about $1.8 billion on fertilizer subsidies this year thanks to low energy prices.
Fertilizer industry groups keep hoping that the reform-minded Modi would use the opportunity presented by lower prices to free up the fertilizer market, as he did with diesel a year ago.
Modi is now more cautious of angering rural voters because of stung by opposition to his reforms, including the defeat of a pro-industry land reform that opponents said was damaging for farmers.
Finance ministry spokesman DS Malik said "Due to the fall in international gas prices, benefits from the fall in fertiliser subsidy bill could accrue to the government this fiscal year," and he declined to comment on the decision not to free the market. Critics of price controls say they encourage Indian farmers to use too much urea, rather than a mix of fertilisers that would be better for productivity and soil health.
India now produces urea at about $375 a tonne. Farmers pay 5,360 rupees ($81) per tonne for subsidised urea, almost unchanged since 2000. Nutrients like Di-Ammonium Phosphate (DAP) and potash, which are partly subsidised, cost three to four times more.
Industry experts say, meaning any change to the subsidy would be quickly felt by both farmers and fertiliser companies.