Vagueness on the part of government in terms of policies was in no way conducive to growth while the delay in fixation of concessional rates affected the industry to its core.

Pricing of decontrolled fertilisers, especially di-ammonium phosphate (DAP), used as a crucial basal dose for crops, has been hanging fire. This coupled with the government's near non-committal on increasing the ad-hoc subsidy left the industry in a total bind.

Says chairman and managing director of Rashtriya Chemicals & Fertilisers (RCF) Deepak Kumar Varma: "It was a year of roll-ins and roll-backs (of policy matters)."

First, it was the decision to raise the maximum retail price (MRP) of urea, a popular controlled fertiliser, by Rs 1 per kg, in the Union budget. This was later reduced by 50 paise. The government rolled back thisdecision when faced with opposition, much to the disappointment of the majority of the industry players.

Then it was the announcement to freeze the MRP of decontrolled fertilisers and to bring in market forces to rule the roost. On August 20, 1998, the centre announced the removal of price controls on decontrolled fertilisers for a period between October 1, 1998 and March 31, 2000. The announcement of a market-ruled price brought cheer to the industry, but was shortlived. Even before the seed to the `free float price' could be sown, the government went back on its words and withdrew the amendment within a month of the announcement. This left the industry, which was reeling under high cost escalation, in distress. Further, not only did the MRP of DAP remain stagnant at Rs 8,300 at the farmgate level, an expected hike in subsidy to compensate for the escalating costs is yet awaited.

Even though the government announced a Rs 500 per tonne hike in subsidy on decontrolled fertilisers for the rabi season, thisdid not equalise the extent of the escalation in input costs. Prices of key raw materials like phosphoric acid had increased which in turn had increased the manufacturing costs of producers.

As a result of blurred policy on the price and subsidy of DAP, a severe shortage was created. This was partially caused by a faulty system of distribution and partially by an uneven spread inflicting further problems not only with manufacturers but also at the farmers' end.

Industry experts say that such a shortage may lead to serious connotations as far as the NPK ratio and the subsequent impact on agricultural output is concerned.

As a concerned senior industry official on condition of anonymity puts it: "The government would be playing with fire if the obscure policy environment were to continue as this would finally impact agricultural output."

The NPK balance which stands at 7.5:4:1 had improved considerably over 9.5:4:1 in 1996-97. Industry experts, however, fear that the NPK balance which could have beenrestored further this year considering the good monsoon season, may actually get distorted due to the an imbalanced use of fertilisers.

Two committee reports suggesting policy initiatives for the beleaguered industry-the Hanumantha Rao committee report on pricing/retention price scheme and the Bureau of Industrial Cost & Prices (BICP) for assessing capacities are gathering dust. "A policy will be announced when the time comes....It takes time for such policies to be framed," is what Minister of Chemicals and Fertilisers SS Barnala said at a recent visit to Mumbai where he inaugurated a seminar.

Operationally, the year 1998 was reasonably good with most plants running at a higher than rated capacities.

Urea consumption in the kharif season was higher at 98 lakh tonnes as compared to 94 lakh tonnes in the same season last year. The rabi consumption is expected to be higher at 108 lakh tonnes as against 103 lakh tonnes last year. Urea imports during the year were far lower at around five to 10 lakh tonnesas against 24 lakh tonnes in the previous year. The drop in imports is largely due to a high level of inventory which was carried forward from the previous year.

The production of urea for the year during the year is expected to touch 196 lakh tonnes as against 185 lakh tonnes last year. This is mainly because most plants were operating at over 100 per cent capacity and a few plant capacities like Iffco's Phulpur and that of Nagarjuna Fertilisers were upgraded.

While the situation in urea was comfortable, the plight of DAP was grim. Imports took a beating due to an uncertain policy on subsidy and prolonged delays on announcement of the DAP price. DAP imports dropped to around nine lakh tonnes in kharif from 18-20 lakh tonnes in the previous season. The trend continued in rabi with imports at around seven lakh tonnes against 16 lakh tonnes in the previous season. Companies did not risk importing large quantities of DAP as the subsidy was low.

This, coupled with a virtual shortage of the fertiliser, ledto a shortfall in DAP consumption by a margin of two lakh tonnes. Production-wise, DAP stood at 36 lakh tonnes, which is the same as last year. There was not much change in the manufacturing or sale trends in the complex and single super phosphate (SSP) fertilisers. The discriminatory treatment to SSP with regards to price fixation and concessional rates continues. The need to formulate a rational policy for SSP on the same basis as that for DAP and other complexes. This is especially so in SSP's case as the price of this fertiliser, unlike DAP and complexes, is still governed by the state governments.

The total industry growth during the year slowed down to 5-6 per cent as compared to 8-9 per cent last year. Even in a grim scenario, manufacturers see a ray of light and hope that the new year will ring in a balanced policy announcement on fertiliser pricing and subsidy.

The industry expects that the government will finally announce a policy decision on urea retention price scheme. A policy statement ofthe assessment of capacities is also expected to be announced in the new year."A balanced policy framework which is stable for at least a year and which can enable the industry to adjudge on the quantum of imports, is welcome," says Varma.

Further, despite a good monsoon which was also rather erratic, the consumption of fertilisers was affected. A senior fertiliser company official says that the situation could have been averted and the country would have derived a better benefit from an un-timely pre-rabi monsoon had the government not turned its back on lifting the price ceiling on decontrolled fertilisers.