Son-downer: Alagiri says no to UPA's urea price reform

By R Jagannathan

Coalition compulsions have slowed down the Manmohan-Chidambaram Reforms Express.

The key to fiscal consolidation lies in reducing subsidies in fuel, fertiliser and food, which the budget for 2012-13 had pegged at Rs 1,79,554 crore - but which has not chance of limiting to that level.

One part of the subsidy rationalisation was kicked off last month when diesel prices were raised by Rs 5 a litre and a ceiling was placed on subsidised cooking gas cylinders at six per connection.

[caption id=“attachment_492634” align=“alignleft” width=“380”]  The key to fiscal consolidation lies in reducing subsidies in fuel, fertiliser and food, which the budget for 2012-13 had pegged at Rs 1,79,554 crore. Reuters[/caption]

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Food, of course, cannot be touched, but the fertiliser part of subsidy reform has been stopped dead in its tracks by the DMK Minister in the cabinet - MK Alagiri, son of M Karunanidhi.

DMK has been muttering darkly about the diesel price hike, and with fertiliser it has now got the chance to prove that it is batting for the aam aadmi - farmers.

According to The Indian Express, Alagiri has not only scuttled the proposed 10 percent hike in urea prices for 2012-13, but also put in a caveat that the price hike next year is subject to his clearance.

Alagiri, the newspaper says, has revised the note to the Cabinet Committee on Economic Affairs (CCEA) by shifting any increase to “the second year” (i.e. 2013-14), and even this comes with this proviso: “The Department of Fertilisers, with the approval of the minister, after recommendations from the Inter-Ministerial Council, may decide MRP increase before every financial year.”

For 2012-13, the budget presented by Pranab Mukherjee had proposed a fertiliser subsidy of Rs 60,974 crore, but the Kelkar Committee on fiscal consolidation believes this could be an under-estimate.

The government has a way of under-budgeting subsidies. Last year, the budgeted fertiliser subsidy was around Rs 50,000 crore. The actual figure turned out to be nearly Rs 18,000 crore more, according to revised budget estimates for 2011-12.

This year too the fertiliser subsidy target will be overshot. And with Alagiri refusing to play ball, even the proposed 10 percent hike - which would have cut the subsidy bill by a paltry Rs 2,400 crore - is a non-starter.

Alagiri, whose son Durai Dayanidhi is absconding in a multi-crore illegal granite mining scam in Tamil Nadu (a non-bailable warrant is out for him) is probably expecting the centre to bail him out first before he will agree to cooperate with the reforms agenda of the UPA.

But then, currently the UPA’s clout with Jayalalithaa’s government in Tamil Nadu is zilch.

So it’s goodbye fertiliser reforms.