Nov 29 (Reuters) - A proposal to subsidize the price of

natural gas used to produce nitrogen fertilizers may stall

because of Brazil's fiscal limitations, Bernardo Silva,

executive director of fertilizer lobby Sinprifert, said on

Friday.

The group, which represents firms including Mosaic,

Eurochem and Yara ( YRAIF ) in Brazil, welcomes the plan because

it would help reduce the country's heavy dependence on imported

fertilizers.

Under the proposal, which was approved by a congressional

committee this week, subsidies amounting to 1.7 billion reais

($281 million) would cover the difference between the market

price of natural gas and "a reference value" of $4 per million

BTUs.

To be competitive, Brazilian nitrogen fertilizer producers

would ideally buy natural gas in the range of $4 and $7 per

million BTUs, Silva said, citing studies. The current price

range is between $12 and $16.

Brazil, an agriculture powerhouse, imports about 85% of all

crop nutrients its farmers need from Russia, China and Canada,

among others.

Petrobras, the state-run energy company which

announced plans to re-enter fertilizer production, could also

play a key role in lowering domestic gas prices.

The company currently reinjects gas extracted from wells

into reservoirs, maximizing oil production. But by reducing the

reinjection rate, Petrobras could boost internal supplies of

natural gas and still be profitable, he said.

Aside from expensive gas, Brazil's current tax regime favors

overall fertilizer imports to the detriment of internal

production, Silva said, with little to suggest short-term

changes.

For example, a recent proposal to impose import tariffs on

ammonium nitrate, used to make certain crop nutrients, was

withdrawn after pushback from domestic farm lobbies, Silva said.

Defenders of the move said it was a way to level the playing

field, but the domestic agriculture lobby feared it would make

certain fertilizers costlier.

($1 = 6.0500 reais)