The fertiliser industry is upset over an inordinate delay in the announcement of a new policy on phosphatic and potassic fertilisers. The kharif season has already set in but the industry still does not know the cost of raw material and finished products that the government would approve for firming up purchase agreements and import orders. Besides, the industry is pitching in for the government to raise the amount of fertiliser subsidy, which is estimated at over three times the Budgetary allocation of Rs 30,986 crore for 2008-09.
The earlier policy had expired three month ago on March 31st. ?This (delay in policy) has led to a piquant situation where manufacturers had no government-approved cost for raw materials and finished products to refer to, at a time when the liquidity position of the companies has reached a stage beyond which it would not be possible to continue with import and production of fertilizers in the country?’ said a senior official of the fertiliser association of India (FAI)
He said the outstanding subsidy bill up to March 31st, for the fertilizers supplied by the industry, is estimated at about Rs 10,000 crore, including escalation in costs yet to be notified by the government. Besides, the payment of subsidy for the first quarter is estimated at Rs 20,000 crore, resulting in the total outstanding payment of Rs 30,000 crore up to June 30, 08.
Perturbed over the development, the chief executives of major fertilisers and importing companies met here on Monday and demanded an immediate redressal of grievances, as any further neglect of the industry woes by the government could seriously jeopardise the production of fertilisers and lead to shortages, impacting the food security of the country.
?The international prices of raw material and finished products have soared substantially but the retail prices of fertilisers to farmers have remained unchanged due to lack of political will,? a senior official who attended the meeting said. The government needs to increase the budgetary support in the monsoon session of the Parliament, he said.
He added that the budget allocation for fertiliser subsidy has been estimated at Rs 30,986 crore for 2008-09, which is grossly inadequate. The estimated real subsidy, based on the current international prices, is almost Rs 96,000 crore, which is three times over the budget estimates.
Similarly, the realisation by the industry, through the retail price at which P&K fertilisers are sold to farmers, is only 15% to 18% of the total delivered cost.
The balance of about 82% to 85 % is yet to be recovered from the government. The current delivered cost of DAP, for instance, varies between Rs 55,000 and Rs 60,000 per tonne. However, fertiliser companies sell DAP at a maximum price of Rs 9,350 a tonne, which is a mere 15-17% of the delivered cost.
The bonds amounting to Rs 7,500 crore given to the industry last fiscal in lieu of part payment of subsidy are presently discounted at 11 %, leaving several of the recipients footing huge losses. Chambal Fertilisers and National Fertilisers recently shot off letters to the department of fertilisers (DoF) asking it to reimburse losses to the tune about Rs 800 crore, incurred because of the bonds issued to them were selling at a big discount in the market.