96 CHAPTER 7


mists have argued in favor of greater liberalization, while the DoF, the MoA, and the fertilizer industry have supported the welfare-state-oriented paradigm. The option of locating units abroad near feedstock sources has been tried successfully in Oman. This is a win-win situation: most stakeholders support it, and it could lead to a decrease in the fertilizer subsidy. However, representa- tives of the domestic fertilizer industry have found it difficult to replicate the Oman example.


Policy Options to Increase the Farmgate Price of Fertilizer An analysis of one-time increases in urea prices suggests that yearly increases in urea prices would face substantial opposition in Parliament. However, on a majority of occasions in the past, when support prices were increased, a rise in the urea price was successfully implemented. When price hikes were opposed, the resistance came from within the government, from either coali- tion members or the ruling party, or both. The stakeholders who actively advocate an increase in farmgate price include the fertilizer industry and most ministries. Given that the government would not be able to enact large price increases, the immediate budgetary impact would be small; but in the current environment of a crisis-ridden farm sector, automatic yearly increases would have substantial political opposition.


Opposition to targeting subsidies at small and marginal farmers comes from medium-sized and large farmers as well as from bureaucrats in the MoA and DoF. Although the idea has been suggested by several sources, includ- ing members of the Planning Commission and bureaucrats in the MoF, pilot projects across the country would be needed to evaluate its suitability and feasibility. Since 2007, no new policy on urea has been adopted, though the government adopted a new policy governing other fertilizers and raised the farmgate price of urea in 2010 (Hindu 2010).


Increasing the price of urea is associated with a possible decrease in foodgrain production. At the same time, it is clear that the effectiveness of urea use can be increased by better-integrated nutrient management. To increase productivity in the face of price hikes for urea, substantial research and dissemination of information in the farm sector would be needed. Chapter 13 discusses political various strategies that could help overcome the political challenges inherent in the various reform options explored here.


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