Kerala - Kochi   

Fertilizer industry seeks sops from government

KOCHI: The Associated Chambers of Commerce and Industry of India (Assocham), in its pre-budget memorandum submitted to the Finance Ministry, has urged the Finance Minister to waive excise duty on capital goods used in fertilizer projects.

It has demanded that capital goods used in fertilizer products be exempted from sales tax and value added tax (VAT).

The chamber has also demanded that the tax holiday under the Income Tax Act be extended to all new fertilizer projects for a period of 10 years so that the sector acquires self-reliance in terms of meeting most of the domestic demand.

Assocham pointed out that domestic capacity and production of fertilizers have stagnated for more than a decade due to unfavourable policies. The demand for fertilizers on the other hand has been rising. This has resulted in steep rise in imports of finished fertilizers, thereby increasing the subsidy requirement further.

Thus, there is an urgent need to attract fresh investment in this sector for creation of additional capacity. The government notified a new investment policy in September 2008, but the pricing policy environment has not attracted investment in major expansion or new projects so far, as the viability of new investment is still uncertain under the policy. The government, therefore, needs to provide the aforesaid tax incentives to make new investment in fertilizer sector viable, the memorandum said.

Assocham was also of the view that other tax incentives were needed for the fertilizer sector since the use of fertilizers was subsidised by the Union government to keep the MRP within affordable limits of farmers so as to encourage consumption, thereby accelerating agricultural production. Levy of taxes and duties either on inputs or on finished fertilizers or on services utilised in production and distribution of fertilizers increases the cost of fertilizers and consequently the subsidy outgo. This goes against the purpose of subsidisation, which is to keep the price of fertilizers low.

The chamber has sought withdrawal of excise duty on fuel oil used for fertilizer manufacture. It has also called for withdrawal of customs duty on LNG, project imports and spares for fertilizer projects, ammonia, phosphoric acid, rock phosphate, sulphur, sulphuric acid and capital goods for implementation of the Clean Development Mechanism (CDM) projects for the fertilizer sector.

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