According to ministry sources, the duty rates would be fixed keeping in mind the cost of production of domestic units and the prices at which imported fertiliser would be available. A number of alternative duty structures had been shortlisted by the taskforce, sources said.

When contacted by The Financial Express, Fertiliser Association of India (FAI) director general Pratap Narayan said that "Among other things, the taskforce has to decide whether it should consider the cost of production of gas-based fertiliser units or the naphtha and fuel oil-based units for determining import duties," he said.

Mr Narayan added that as prices of feedstock was shooting up, there was a need to have a considerably high-level of import duty to safeguard the interests of the industry.

It is very important that the government should put in place an appropriate import duty structure for fertilisers in the next few months as the quantitative restrictions (QRs) on urea imports is slated to be removed in April 2001. Besides, the bound duty rate of 5 per cent for DAP is inadequate for protecting the domestic industry which suffers from inherent disadvantages as units have to depend on import of rock phosphate and phosphoric acid.

Government sources said that while there was a pressing need for increasing the bound rate of duty on DAP, it would be a complicated procedure as the matter has to be negotiated with DAP exporting countries who will be affected by the decision.

As there is no existing bound rate on urea, the government can fix an appropriate import rate without the need of getting into dialogues with urea exporters.

The WTO taskforce had been set up by the department of fertilisers earlier this year to give policy suggestions which would help the domestic industry to cope with liberalisation. The taskforce, which has representatives from the industry and the ministries of fertiliser, commerce and finance, is evaluating the provisions of the agreement on agriculture and other WTO agreements which may have an impact on the fertiliser sector once the QRs are removed.