``While the fertiliser industry's role as a major contributor to the national goal of food security is beyond question, certain drawbacks need to be examined closely and remedied so that the industry's contribution produces an even more positive impact in realising the goals of self-sufficiency and food security'', he told a seminar organised here by the department of fertilsers, Federation of Indian Chambers of Commerce and Industry and the Southern India Chamber of Commerce and Industry.

He said the fertiliser industry looks for strong policy initiatives to enable it to be an enthusiastic partner with the government in fulfilling relevant national aspirations. Any move to arrange imports through a centralised agency in order to save on subsidies given to manufacturing units is not advisable. The manufacturers and marketers have already established their credentials in efficiently distributing fertilisers etc. to the farmers across the country. The system can continue. Otherwise, there could be possible shortfalls and breaks in the supply chains. The manufacturers can continue to be reasonably compensated through subsidies and fulfill their useful role.

CEOs of fertiliser companies in the south are of the opinion that the proposal to weed out naphtha-based urea plants would be an unwise move. The reasons are: (a) the quantity of urea, about six million tonne, that India would need is not available in the world market, (b) the global prices will shoot up to over $250 a tonne when India enters the market for large-scale purchases and (c) there is immense scope to make the naphtha-based urea plants cost-effective along with LNG. The industry wants the government to make both the subsidy policy and the announcements for its implementation a long-term affair. This would enable the fertiliser companies to plan their operations more soundly.

They feel though the Indian fertiliser industry is comparable in productivity and efficiency their financial performance has been unsatisfactory because of factors like higher input and operational costs. This should be one of the major reasons for the fertiliser sector not attracting any worthwhile investments in the recent past.

Imports are cheaper only because the input and operational costs in those countries are far less than that in India.The concept of allowing for a post tax return of 12 per cent at normative operating costs was no more valid. The norms have to be refixed considering the galloping costs of inputs like feedstock and power.

``I would think it would be prudent to examine these and look for positive remedies and treat fertiliser industry as a priority industry'', Mr Muthiah said.