The fertiliser ministry, in a note to the EGoM on domestic natural gas pricing, suggested that gas should not be priced more than $6 mmBtu. If the price is worked out as per the Rangarajan formula, doubling the price from $4.2 now to over $8, the fertiliser subsidy burden would go up by a whopping R16,992 crore a year, the ministry has said. The fertiliser ministry warned that any significant jump in domestic gas price will benefit the international fertiliser industry as the import of fertilisers may become more economical as compared to domestic cost of production. The fertiliser ministry is of the opinion that instead of a simple average of gas prices at different markets, the final price should be arrived by a weighted average method. A panel led by C Rangarajan, the Prime Minister’s economic adviser, in December suggested a system that would price the fuel at $8-8.5 per mmBtu. This compares with the current domestic prices at $4.2/mmbtu, while imported natural gas costs in the range of $12-14/mmBtu. The power ministry is also not in favour of high prices recommended by the panel. Ministry officials said high prices will put pressure on the consumers and state electricity boards will not be able to purchase it. India being the second-largest consumer of fertilisers globally, imports about 8 million tonne of urea from a total requirement of about 29 million tonne. The domestic cost of production of urea using a mix of domestic and imported gas is R11,000 crore. Currently, urea is sold at a government fixed rate of R5,360/tonne and the government bears a subsidy of about R5,640/tonne on domestic urea, whereas on imported urea the subsidy is around R8,640 per tonne. The Rangarajan committee’s proposal to double the domestic price of natural gas, if implemented, could adversely affect the government’s subsidy reduction plan and make the new urea investment policy “redundant”. The proposed new urea investment policy aims at facilitating investments to the tune of R35,000 crore in fresh urea capacities. The fertiliser ministry earlier wrote to the petroleum ministry saying that “the diversion of allocation of gas from fertiliser sector to power sector will skyrocket the subsidy burden on the exchequer.” According to official data, gas output from the KG-D6 block has dropped to around 15.5 million standard cubic meters per day. The fertiliser ministry wants to protect the fuel allocation for the sector for the benefit of farmers. In the absence of domestic gas, fertiliser firms would have to import gas at thrice the domestic price of $4.2/mmbtu and would increase the subsidy bill. In Budget 2013, the fertiliser subsidy was estimated at R60,974 crore, including R13,398 crore for imported urea, R19,000 crore for indigenous urea and R28,576 crore for the sale of decontrolled fertilisers.