In 2011-12, urea is estimated to have contributed INR24,500 crore to the fertiliser subsidy bill.
"It (the proposal) has gone back to the ministry. They have to take a second look," Home Minister P Chidambaram told reporters after a meeting of the Cabinet Committee of Economic Affairs.
Urea price at present is fully controlled. It was last revised in April 2010 from INR4,830 per tonne to the current level of INR5,310 a tonne.
Earlier, an empowered group of minister had approved deregulating the key fertiliser.