Retention pricing for fertilisers on its way out

New Delhi, February 10: | Updated: Feb 11 2002, 05:30am hrs
Finance minister Yashwant Sinha is likely to announce phasing out of the retention price mechanism for the fertiliser sector in the forthcoming Budget. The move will pave the way for introduction of a new fertiliser policy which will see the existing huge subsidy bill of Rs 13,000 crore for the sector coming down drastically.

Mr Sinha had announced a major shift from the unit-wise retention price formula to a group concession scheme in the current Budget. Phasing out of the retention pricing mechanism is high on the governments agenda, senior fertiliser ministry officials told The Financial Express.

The group of ministers headed by Mr Sinha had earlier reached a consensus on finalising a long-term fertiliser policy and even reportedly decided to scrap the concession schemes, sources said and pointed out that the government was also concerned over the falling urea output which touched an all time low of 8 lakh tonne at a time when it was targeting around 7 per cent growth in the farm sector.

By introducing reforms, the government aims at enabling the fertiliser industry to face new challenges and bring in greater efficiency, said an official.

According to Fertiliser Association of India, the absence of a holistic fertiliser policy has been causing problems for the Rs 35,000-crore industry which is likely to incur heavy losses following the recent cut in retention price of urea. If the situation does not improve, the country may even have to resort to large-scale urea imports in the near future, which in turn will lead to increase in global prices, says the association.

Fertiliser minister SS Dhindsa said, the government is considering a revision of the retention pricing formula as the present pricing mechanism and concession scheme can become counter-productive in achieving the goal of revitalising the industry.