Warry of the burgeoning fertiliser subsidy bill which is expected to be in the range of Rs 100,000 crore from Rs 40,338 crore a year ago, the cost plus approach will be done away by opening up the sector.
?From April next year, the government will announce measures to cap the subsidy level between Rs 33,000 to Rs 40,000 crore from April, 2009, prices of the nutrients will be controlled, balanced fertilisers will be introduced and the fertiliser sector which till date is unattractive will be made investor friendly?? the secretary fertilizers, Atul Chaturvedi told FE on the sidelines of a seminar organised by the Fertiliser Association of India (FAI) here on Thursday.
The government has decided to do strategic buying for raw materials and fertilisers in the international market as it has witnessed a crash in the international fertiliser prices, a new policy regime will be modeled in a way that the prices are decided by market forces driven my economics, he said.
The move would help in adding more capacities not forthcoming for over a decade.
However, Chaturvedi evaded a question when asked how he could monitor the prices in the international market saying the sector in politically sensitive, and the final decision will be taken by the cabinet in this regard.
The officials in the Department of Fertilisers indicated that the government is considering an option of fixed susbsidy per tonne of nutrient with open price. De-bottlenecking will be encouraged and and naphtha and fuel oil based plants will be switched over to gas adding a fresh capacity of over 1,00,000 tonnes of urea reducing dependence on costly imports and thereby reduction in subsidy bill significantly.
The government has recently initiated the process of liberalization by linking the producers? prices of phosphatic and potassic fertilisers to Import Parity Prices (IPP). The producers? price of urea from new investments has also been proposed to be linked to IPP.
Other initiatives such as nutrient-wise pricing and the policy for customized , coated and fortified fertilizers have been proposed. However, the industry leaders maintain, policies in this area are not realistic.