Phosphoric acid report an acid test for manufacturers

New Delhi, Nov 14 | Updated: Nov 15 2005, 05:56am hrs
Even before the department of fertilisers (DoF) could send the phosphoric acid report prepared by the Abhijit Sen Committee to the Cabinet Committee on Economic Affairs (CCEA) to sort out the pricing issue for 2005-06, manufacturers are an apprehensive lot.

They feel that the methodology adopted by the committees report regarding the pricing mechanism is unrealistic and their business interests may not be fully addressed by the government.

This has led to confusion and they fear that it may lead to heavy shortfall in the domestic production of di-ammonium phosphate (DAP).

The fertiliser industry had asked the DoF to finalise the pricing mechanism for phosphatic acid, an important input in the manufacture of DAP, as negotiated by the Phos Acid Consumer Group with the foreign suppliers in June.

In a letter written to the department, the Fertiliser Association of India (FAI) had urged the government to make the announcement soon, as uncertainty over pricing was affecting the production of DAP.

The consumer group had negotiated the price at $435 a tonne in April. However, the ministry referred the issue to the CCEA and recommended the price at $431 a tonne.

Contended FAI, Had the government made the announcement on time and accepted the price negotiated by the consumer group, the production of DAP would have been higher.

The representative body of the fertiliser industry contends that the shortfall in DAP production occurred because when the phosphoric acid price was notified in June 2005 at $431 per tonne, it was only an interim price which was much lower than the price negotiated by the consumer group.

FAI argues that the announcement of the price will enable the DAP industry to maximise production in the coming months. This, in turn, will help the government reduce the outgo of concession.

FAI said about 12 lakh tonne of DAP has already been imported during Kharif 2005 and another 8 lakh tonne or so is likely to be imported during Rabi 2005-06 bringing the total DAP imports during the current year to 20 lakh tonne.