The Modi government is putting on hold its plans for some key economic reforms Union Finance Minister Arun Jaitley had announced in his maiden Budget last July.

These include decontrol of urea prices, fewer subsidised cylinders a year and withdrawal of kerosene from the public distribution system (PDS).

Fertilizer Minister Ananth Kumar told The Hindu that the administered price controls for urea would stay. “We are committed to keeping the policy pro-farmer,” he said.

Fear of a political backlash based on inputs from party leaders — now established by the rout in the Delhi Assembly elections — has forced the hands of the government.

Asked if the government’s unpopular reform proposals were behind the victory of the Aam Aadmi Party in Delhi, Mr. Kumar said: “Narendrabhai Modi was and always will be pro-farmers.”

“The Finance Minister has already put on hold an order dated November 24 that directed us to withdraw kerosene as a general PDS item and direct it only to un-electrified households,” said an Oil Ministry official. “PDS kerosene will continue for now.”

The fine print of the July Budget said: “… there is need to cap the [number of] subsidised cylinders at a more realistic level.” The Oil Ministry source said that after the AAP victory in Delhi, the Modi government was likely to keep the number of subsidised cylinders at the existing 12 a connection annually. “The Oil Minister is not in favour of reducing the number.” When contacted, Oil Minister Dharmendra Pradhan’s office said he was not available for comment as he was out of the country.

Protecting and even expanding the PDS and keeping fertilizer prices low were part of the election promises that the Aam Aadmi Party (AAP) made in Delhi.

The AAP manifesto says: “The AAP government will end corruption in the PDS with the involvement of mohalla sabhas ... instead of direct cash transfer, we will ensure direct transfer of rations to the families and will include dal and oil in the PDS.”

The AAP supports lower fertilizer prices as it believes high input costs in the face of low procurement prices are pushing the rural economy into distress and thousands of farmers to suicide every year.

The fine print of the July Budget said: “What is now urgently required are certain pricing reforms in the urea sector with an immediate price correction for urea … This is not only essential from the viewpoint of the size of the subsidy bill but also from the viewpoint of balanced use of N, P & K [Nitrogen, Phosphate & Potassium] nutrients.”

Urea is the only fertilizer under statutory price control for which the maximum retail price is fixed by the Centre. The difference between production cost incurred by a manufacturer and the administered concessional price is reimbursed as subsidy. For the purpose of the calculation of the subsidy element, the Fertilizer Ministry, in consultation with manufacturers, determines the production cost for every urea plant separately. As a result, the manufacturers’ lobby is opposed to reform.

The other fertilizers were shifted to a subsidy regime by the Manmohan Singh government under which subsidy is no longer paid to manufacturers on the basis of production cost. Instead, the quantity sold is taken into account.