The budgeted allocation for ad-hoc subsidy is Rs 3,000 crore but the actual figure may cross the Rs 4,800 mark. The higher subsidy will be primarily on account of the sharp depreciation in the value of the rupee, which has gone up from Rs 36 to the dollar during kharif 1997 and Rs 38 during rabi last year to Rs 41-42 at present. There has also been a sharp increase in the international price of phosphoric acid - an important input in DAP - which is imported in large quantities.

These factors, taken together, will increase the farmgate cost of DAP to around Rs 13,000 per tonne as against last year's cost of Rs 12,050 per tonne. Given that the selling price of DAP has been fixed at Rs 8,300 per tonne, the ad-hoc subsidy level will go up to roughly Rs 4,700 pertonne as against Rs 3,500 tonne announced for rabi last year. In fact, it has been estimated that the concession amount may have to be substantially higher during rabi season if the depreciation in the value of the rupee continues.

China is already in the DAP market and this is going to escalate international prices, complicating the situation even more. Industry sources said that they would not be surprised if the farmgate price touches the Rs 14,000 per tonne mark later in the year.

The government will have no option but to provide for the extra ad-hoc subsidy. The reason is that the end-price of DAP and other complex fertilisers is fixed. Since the bulk of these nutrients are imported, supplies will only arrive in India if the subsidy levels provide the right incentive to producers (who import the raw materials) and importers (who import the end-product). Increasing the consumer price is a solution but it may not be acceptable in the current political scenario.

According to calculations made by thefertiliser industry, after including a carryover of around Rs 800 crore worth of subsidy from the previous year and excluding the anticipated fall in production and import of DAP and other complexes because of lack of governmental action in announcing the subsidy quantum, the total extra outgo on ad-hoc subsidy is expected to come to around Rs 1,800 crore.

This extra subsidy figure will have to be added to another Rs 1,600 crore that the finance ministry has to provide for in order to account for the rollback in urea prices. The total unbudgeted-for subsidy amount comes to Rs 3,400 crore.

Meanwhile, the delay in announcing ad-hoc subsidies for DAP and related complexes is slated to result in a steep 20 per cent shortfall in the supply of this vital crop nutrient in 1998-99.

Already, import of DAP is down by 50 per cent to 8.7 lakh tonnes as against 15 lakh tonnes contracted by April last year. The uncertainty has forced importers to cancel contracts for around 1.50 lakh tonnes of DAP. The Gujaratcyclone has also destroyed large quantities of DAP stocked at the ports. Estimates, made last week, show that DAP availability may fall short of demand by 20 per cent or a whopping one million tonnes. DAP demand last year was 50 lakh tonnes.

Food and fertiliser minister SS Barnala has sounded a red alert on the DAP front. And the fertiliser department has entered into a row with the agriculture ministry (whose responsibility it is to announce the quantum of concessions) for the delay in the announcement. Half a dozen reminders have been sent to the agriculture ministry but apparently to no avail. A livid Barnala is now expected to take up the issue with the Prime Minister.

The agriculture ministry, in turn, is awaiting a study, being conducted by the Bureau of Industrial Costs and Prices (BICP), on the quantum of subsidy that should be given to producers and importers of DAP and other complexes.

The BICP was supposed to complete the study (based on cost of production of domestic manufacturers) by Maybut sources said that it would be another month before the study is through.

Domestic manufacturers and importers alike are confused over the lack of initiative on the part of the government. There has been a steep fall in the value of the rupee and a rise in the international price of DAP and its raw materials (bulk of which is imported). Unless the extent of concession is known (since the consumer price is already fixed by the government), it is not possible to enter into bulk contracts for imports, it is argued.

The DAP shortfall is expected to surface more intensely during the rabi season, when supplies are expected to dry up. Fertiliser department sources claim that even if imports are contracted for in the next few weeks, the logistics of imports will mean that the nutrients will not be available at the time rabi sowing takes place.

Barnala has now taken the initiative, in consultation with his party in Punjab. The Punjab government last week floated a tender for three lakh tonnes of DAP. But thiswill only mitigate the problem to a limited extent.