Please comment on the government's recent announcement increasing the farmgate prices of urea and subsidies on phosphatic and potassic fertilisers.SVB: The increase in urea prices is a welcome step though delayed -- it should have been done last year. However, the price hike announced by the government is inadequate. It should have been in the range of 15 per cent.Even at current levels, assuming a consumption of 20 million tonnes of urea, the savings in subsidy is around Rs 760 crore. The aim should be to try and save Rs 1,500 crore in the next two years.

As for di-ammonium phosphate (DAP) and other complex fertilisers, the increase in subsidy is long overdue, it should have been announced in the kharif season. The current hike in subsidy in DAP from Rs 3,500 per tonne to Rs 4,400 per tonnes is not adequate and shouldhave been increased to Rs 5,000 to Rs 5,200 per tonne.

hat are your views on the issue of controlling subsidy?
What the government requires to do is rationalise the subsidy for phosphatic and potassic fertilisers. At current levels, the subsidy to the government is to the tune of Rs 12,000 crore. It will be very difficult for the government to bear the burden. The proper thing to do will be to peg the subsidy at a certain level and free the market price of the fertiliser. For example, subsidy on indigenous DAP could be pegged to Rs 3,500 per tonne and on imported DAP at Rs 2,500 per tonne and the market price should be freed, which will make the fertiliser available at around Rs 9,500 - Rs 10,000 per tonne at the farmgate.

Similarly, for complex fertilisers, the subsidy should be frozen in the proportion of the contents and the market forces should be allowed to determine the prices.

For MOP, the subsidy should be pegged at Rs 2,000, while the market price if freed should be around Rs 4,700.For single super phosphate (SSP) the subsidy should be one-third that of DAP and the market price will be adjusted accordingly. For a reduction of every Rs 1,000 per tonne in the subsidy for DAP, subsidy on SSP should be reduced by Rs 350 a tonne.Thus the aim should be to substantially reduce the subsidy for all P&K in the next two years and bring it down to 1993-94 levels, when subsidy on DAP was Rs 1,000, subsidies on complex fertilisers were between Rs 500 to Rs 999 per tonne, SSP at Rs 340 per tonne and muriate of potash (MOP) at Rs 1,000.

What about an import policy for fertilisers?
Currently, apart from SSP all P&K fertilisers are decanalised. Though urea is canalised, this should be continued as long as there is price control in the sector.

Considering the huge DAP capacity coming up at Oswal Agro (1.9 million tonnes), there is a need to control imports of the fertiliser. Its import should be limited to the gap between demand and domestic production,and indigenous producers should beencouraged. Currently the demand for DAP is in the range of 5.5 million tonnes and after Oswal's unit goes on stream this month the supply will be five million tonnes. Subsidy should be monitored in such a way that imports are discouraged. By controlling imports of DAP, indigenous SSP manufacturers who are operating at around 55 per cent capacity will also get a boost.

What are your views on fertiliser pricing policy?
There is a need to speed up the process of price fixation, which is one of the main reasons hampering the availability of fertilisers. Take the issue of MOP, for example, throughout 1998 there had been a shortage due to non-fixation of subsidy, which had resulted in the postponement/ cancellation of imports. After the government announced the subsidy, there is currently a glut in supplies. In fact, the situation is such that there are ships still waiting in ports for clearance. This needs to be avoided and a consistent policy is needed.

Also, presently, apart from SSP, prices ofall other fertilisers are decided by the Centre. Because the cost elements of SSP are available with the Centre, even the SSP subsidy should be fixed by the Centre, on parity with DAP at one-third of what is available to the latter.

What needs to be done to improve efficient use of fertilisers?
Currently urea sales, inclusive of subsidy is roughly in the range of Rs 12,500 crore. Only 40 per cent of the urea sold is utilised while the rest is lost by way of leaching, percolation, evaporation, etc. Thus only Rs 5,000 crore worth of urea is currently utilised.

The government should introduce a programme to encourage efficient use of urea, for which a separate budget allocation of around Rs 200 crore needs to be made. This fund can be utilised by research institutions to come out with ways for efficient use of fertilsers and to guide farmers.

A 10 per cent improvement in usage will result in a saving of Rs 1,250 crore and at the same time food grain production will rise by 10-12 million tonneswithout any extra cost.

How serious is the issue of subsidy availability?
Subsidy availability has no doubt improved over the last two years after the government allowed 80 per cent of the amount to be given on ad-hoc basis. Still this amount is available to the company after two or three months, the remaining amount is available after six months. Further no interest is paid for the interim period.

What the industry has asked for is that the Centre should give away 100 per cent of the subsidy at one stroke and any adjustments can be made after clearance of all the papers.