The Hindu : Business : New pricing scheme for phosphatics

Online edition of India's National Newspaper
Thursday, Sep 09, 2004

Business

Business

New pricing scheme for phosphatics

By Our Special Correspondent

NEW DELHI, SEPT. 8. The Government today approved a new system of subsidy and pricing for phosphatic and potassic fertilizers linked to international prices. The scheme to be evolved by the Department of Fertilisers in consultation with the Agriculture and Finance Ministries is expected to be a "more transparent and cost effective system".

The decision was taken here at a meeting of the Cabinet Committee on Economic Affairs (CCEA) which also cleared this year's price for phosphoric acid at $395.45 per tonne on cash basis.

The methodology for a new system of concessions on phosphatic and potassic fertilizers will be worked out by the Department of Fertilizers based on international prices of di-ammonium phosphate (DAP). According to an official release, this would be adopted as the benchmark after consultation with Departments of Expenditure and Agriculture and Cooperation.

The decision is expected to help indigenous manufacturers to import and produce phosphatic and potassic fertilizers based on the concession extended at the price at which imports are finalised by manufacturers. "The cost plus system would be substituted by a more transparent and cost effective system which may lead to savings", it is stated. The prices will come into effect retrospectively from April 1 this year.

Earlier, briefing the media, the Union Finance Minister, P. Chidambaram, said the CCEA also cleared the Fertiliser Ministry's demand to allow import of phosphoric acid at a negotiated price. He said steps have also been taken to ensure adequate supplies of DAP for the remaining kharif season and the forthcoming rabi season. In addition, private and public sector manufacturers have been asked to gear up the production to meet DAP demand.

The decisions taken by the CCEA are in the backdrop of the fact that indigenous DAP price varies with the price of imported phosphoric acid and imported ammonia, being the raw materials primarily used for manufacture of DAP.

The delivered cost of DAP produced within the country has always been higher as compared to the delivered cost of imported DAP. This is because of the country's complete dependence on import for basic raw materials required for DAP production.

A task force, constituted to study WTO-related issues in fertilisers, had recommended that subsidy on indigenous DAP should not exceed concession on imported DAP beyond 26 per cent of its cost and freight price. However, under special circumstances, when the imported DAP prices fall sharply, this differential could be extended up to 30 per cent.

Till now, the government has been paying higher subsidy on indigenously-produced DAP.

In 2003-04, the government paid a subsidy of Rs. 3,254 a tonne on indigenous DAP against Rs. 2,577 in 2002-03. The concession on imported DAP was Rs. 2,134 a tonne last fiscal against Rs. 1,688 in 2002-03.

Printer friendly page
Send this article to Friends by E-Mail

Business