No Impact of Gas Prices on Urea
The
fluctuation in the prices of domestic cooking gas does not affect the
price of urea. However, the rise in price of natural gas will increase
the subsidy burden on the exchequer as there is a direct impact of rise
in gas price on the prices of fertilizers since increase in the price of
gas by Rs.1.00 per MMBTU results in the increase of the cost of
production of urea by Rs. 25.99 (6.499x4= 25.99) (The weighted average
energy norm for all 27 gas based urea units in the country is 6.499
Gcal/MT and 1 Gcal = 3.96 MMBTU~ 4MMBTU) . Therefore, the additional
liability of subsidy towards domestic urea would be Rs.25.99/MT of urea
approximately. On an average, in India, around 25.99 MMBTU of natural
gas is required to produce one MT urea. If gas price increases by
$1/MMBTU per MT increase in production cost of urea will be
25.99x1x60=Rs.1559/MT. Therefore, an increase of USD 1/MMBTU translates
to enhanced cost of production of about (60x25.99=1559) Rs.1559/MT of
urea. The entire impact of increase in gas price would be on subsidy
outgo as the MRP of urea is statutorily controlled. MRP of urea is statutorily fixed by the Government. At present, the Maximum Retail Price (MRP) is Rs. 5360 per MT (exclusive of 1% central excise duty, central sales tax, countervailing duty, the sales tax and other local taxes wherever levied) w.e.f. 01st November, 2012.
Further, the Government of Uttar Pradesh and Gujarat have levied Additional VAT on natural gas used by urea plants situated in these states. Impact of this additional VAT is calculated per MT of urea on the quantity of urea sold in these states, separately for each state and is recovered from the farmers of these respective states by charging Rs.940/- per MT and Rs. 300/- respectively.
This information was given by Minister of State for Chemicals and Fertilizers Shri Hansraj Gangaram Ahir in reply to a Question in the Lok Sabha today.
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