Fertiliser ministry to seek subsidy increase, rationalisation of raw material import tax.

As part of its attempt to ensure a steady fertiliser supply to farmers, the ministry for chemicals and fertilizers plans to approach the finance ministry to enhance subsidy allocation towards soil nutrients and rationalise import duty on key raw materials used in manufacturing.

“The fertiliser ministry will ask for an increase in allocation to the tune of Rs.30,000 crore,” said a senior government official requesting anonymity.

This is over and above the government’s provision of  Rs.70,000 crore for fertiliser subsidies in the Union budget of 2016-17.

The fertiliser ministry’s demand comes at a time when the country is expecting a good crop yield despite hopes of above-average rainfall receding. India has experienced two successive years of drought.

Explaining the rationale for the demand, the official said, “The carried-over liability from the last fiscal stood at Rs.43,000 crore and the current year’s budgetary provision will not be able to meet the targeted subsidy for this year. Hence, we are in the process to seek additional funds under the revised estimates.”    

According to information available on the website of the fertiliser ministry, the department of fertiliser had sought Rs.28,000 crore during last year’s revised estimates, but it was not accepted by the finance ministry.

The subsidy allocation is required to pay manufacturers who sell fertilisers at a lower rate compared with the cost price and the price difference is reimbursed by the government. For instance, the price of urea—most popular and the cheapest fertiliser available to farmers—is capped at Rs.5,360 per tonne whereas the actual cost is around Rs.15,000.

The government has stepped up its efforts to towards fertiliser security through a district-wise plan for supply and revival of closed manufacturing units.

Another government official, who also did not want to be named, said the government is also ready with a proposal to rationalise import tax on key raw materials used in manufacturing of fertilisers in order to increase domestic production.

The country is completely dependent on imports to meet its potash needs, one of the main crop nutrients used in India. According to information available on the website of the fertilizer department, India imports 25% of its urea requirements, 90% of phosphates and 100% of potash.

“Currently, import duty on rock phosphate is 2.5% and that on di-ammonium phosphate (DAP) and muriate of potash attracts an import duty of 5%. We are in favour of lowering the duties which will help in increasing local production of crop nutrients,” said the official.

Also, import tax on urea and phosphoric acid needs to be reduced which stands at 5% and 7%, respectively, the official added.

Experts concur that import duties on raw material required for fertiliser manufacturing should be lowered.

“Make in India will not happen unless you make raw material cheaper. Once this is done, price of domestic production will be low. The government should also waive duty on imported RLNG (re-gasified liquefied natural gas), which is used for fertiliser production,” said U.S. Jha, former chairman and managing director of state-owned Rashtriya Chemicals and Fertilisers Ltd.

The government should make higher provision for subsidy during the preparation of annual budget, Jha added.

Queries emailed to the spokesperson of the fertiliser ministry on 19 September remained unanswered.

This also comes at a time when the National Democratic Alliance government plans to introduce direct benefit transfer of fertiliser subsidies.

As reported by InfraCircle on 25 August, manufacturers will be given subsidy only for the fertiliser bought by the intended beneficiaries who will be identified through their Aadhaar or voter identification card details.

According to information available on the website of the fertiliser ministry, production of urea stood at 22.59 million tonne (MT), DAP at 3.45 MT, NPK (nitrogen-phosphorus-potassium) complex fertilisers at 7.83 MT and that of single superphosphate was at 4.17 MT during 2014-15.

Source : vccircle.com