"Considering about Rs 14,000 per tonne production cost of di-ammonium phosphate (DAP) due to increased cost of imported raw material and rupee depreciation, government determined selling price of Rs 8,300 per tonne and subsidy of Rs 4,000 per tonne leaves a huge gap of Rs 1,700 per tonne uncovered," FAI sources said.

To maintain fertiliser consumption at last year's levels, the government should immediately announce enhanced subsidy to ensure realisation of `reasonable' production and distribution costs, sources said.

The association crticised the government for reversing its decision of allowing manufacturers and importers to fix selling prices and said "there should not be a policy of fixing both -- the subsidy and the selling price".

"Consequent to reversal of the decision andrestoration of status quo, there will be a serious setback to efforts of reviving consumption of decontrolled fertilisers," it said.

The FAI, based on earlier promises, said that suppliers would be allowed to fix selling prices, they had worked out their economics and accordingly contracted for fresh imports.

"Now, with selling price having been restored to Rs 8,300 per tonne and uncertainties prevailing regarding concession rate, it is unlikely that contracted imports will eventually materialise," the association said.

In fact, there have been some reports of cancellation of contracts and putting on hold contemplated plans for further imports, it said.

FAI said during kharif season 1998, there was a setback as the government continued to control selling prices at same level as during 1997-98 without announcing the subsidy even though the season has already come to an end.

The continuing uncertainties and apprehensions about inadequate coverage of the reasonable cost had affected supplies duringkharif 1998, FAI sources said.

The import of DAP declined from 0.653 million tonnes during April-July 1997 to 0.588 million tonnes during April-July 1998. Likewise the domestic production declined from 1.245 million tonnes during April-July 1998 to 1.227 million tonnes during the same period in 1998.