Fertiliser subsidy may go up despite price decontrol .

New Delhi, March 21 The move to decontrol prices of all non-urea fertilisers with effect from April 1, as part of the changeover to a nutrient-based subsidy (NBS) regime, is supposed to help lessen the Centre's subsidy burden.

But if the new rates of subsidy applicable on different fertilisers from the coming fiscal are compared with their existing levels, a somewhat different picture emerges. In most products, the subsidy payable to fertiliser companies will actually go up.

Take di-ammonium phosphate (DAP), where manufacturers and importers are currently given a concession of Rs 10,245 a tonne in return for selling at a controlled maximum retail price (MRP) of Rs 9,350 a tonne.

In the event of decontrol, companies will technically enjoy the freedom to set their own MRPs. Notwithstanding that, the Centre has decided to enhance the subsidy they would receive on DAP sales by 59 per cent to Rs 16,268 a tonne.

Likewise, the subsidy on mono-ammonium phosphate (MAP) has been raised by a whopping 104 per cent and that on triple super phosphate (TSP) by 38.5 per cent. Earlier, there was no subsidy on ammonium sulphate (AS), whereas now it has been fixed at Rs 5,195 a tonne, benefiting Gujarat State Fertilisers & Chemicals and Fertilisers and Chemicals Travancore.

Additional subsidy

Moreover, companies would be entitled to an additional subsidy of Rs 300 a tonne if they fortify their fertilisers with boron and Rs 500 in case of zinc. The current regime does not extend any such sops on secondary and micro-nutrients.

The only major product whose subsidy has been slashed, by over Rs 4,700 a tonne, is muriate of potash (MOP). Under the NBS, the Centre has fixed a per kg subsidy of Rs 23.227 on nitrogen (N), Rs 26.276 on phosphorous (P), Rs 24.487 on potash (P) and Rs 1.784 on sulphur (S).

These, in turn, have been linked to the import parity prices of urea, DAP, MOP and sulphur, taken at $310, $500, $370 and $190 a tonne, respectively and at Rs 46-to-the-dollar.

The lower subsidy on MOP – and thereby the ‘K' component in complex fertilisers – is mainly due to Indian importers contracting material for 2010-11 at almost $100 a tonne below the rates negotiated for this fiscal. The accompanying table shows that the subsidy rates have been increased for even many complexes, excepting those not containing any ‘K'.

“The higher subsidies would make it very difficult for us to raise MRPs. In fact, we have been sounded out to keep any hikes to within Rs 30 a bag, i.e. Rs 600 a tonne,” an industry official told Business Line.

Source : Business Line