The CAG has criticised the department of fertilisers (DoF) for delaying finalisation of contracts for import of Di-Ammonium Phosphate (DAP) and said this led to an “avoidable” subsidy burden of Rs 5,555 crore for the government. “Fixation of benchmark at a lower level in comparison to then prevailing international prices for determining nutrient based subsidy (NBS) rates for DAP resulted in delay in finalisation of contracts for import of DAP for 2011-12. This led to an avoidable subsidy burden of Rs 5,555 crore,” the CAG said in its report after a performance audit of NBS policy for decontrolled phosphatic and potassic fertilisers.
Under the NBS policy, MRP of P&K fertilisers were left open and manufacturers/importers/marketers were allowed to fix MRP of P&K fertilisers at a reasonable level.
The CAG said the DoF had to bear an additional subsidy burden of Rs 653 crore due to payment of subsidy at higher NBS rates of 2011-12 on additional quantity of imported fertilisers supplied to states during February-March 2012 despite there being no immediate requirement. Besides, there was no monitoring mechanism in DoF to ensure that the prices fixed by fertiliser companies were based on their cost of production and that these were reasonable, the CAG observed. The report said the DoF did not finalise guidelines for recovery from fertiliser companies using cheap domestic APM gas for production of ammonia even after the delay of more than two years after direction of empowered group of ministers in February 2012 in this regard.