NEW DELHI, May 2: Credit rating either by Moody's or Standard & Poor's and an up-front advance of as much as 15 per cent are among a host of stringent conditions imposed on suppliers of imported urea by the fertiliser department last month, in a bid to keep scamsters away. India imports urea worth around Rs 2,000 crore every year.

The scam-tainted department of fertiliser has also struck out the names of National Fertilisers Ltd (NFL) and Paradeep Phosphates from the list of companies allowed to import urea. Applications by Nafed and Projects and Equipment Corporation (PEC) to become canalising agents have been turned down.

Only the State Trading Corporation (STC), the Minerals and Metals Trading Corporation (MMTC) and Indian Potash Ltd (IPL) have been given the mandate to import roughly 1.1 million tonnes of urea for the kharif season.

Suppliers have been categorised into three distinct groups -- producers, accredited suppliers and other suppliers. Those intending to supply urea will have to provide a reference from a bank of international repute and credit rating is a must for all new suppliers.

Producers of urea need not shell out any earnest money deposit (EMD) and the performance guarantee (PG) bond amount is a mere one per cent of the contracted value. But the norms are much more stringent for trading companies. Accredited suppliers (defined as those who have supplied urea to India in the last three years or to other countries for the same number of years) have to pay an EMD of $3 per tonne of urea and a PG bond of three per cent.

For new suppliers, it will be virtually impossible to get in unless they have a lot of financial musclepower. They have to put up an EMD of $10 per tonne and a PG bond of 10 per cent of the bid value. At current international urea prices, the up-front deposits work out to around 15 per cent of the contract amount.

Earlier, all non-producing suppliers were defined under a single category and were entitled to pay an EMD of $1 per tonne and a PG of two per cent.

What is more, the fertiliser department has stipulated that all decisions will have to be taken collectively, either by a purchase committee or a board-level committee. This is to ensure that responsibility is shared by all the committee members.

All payments will have to be made through the letter of credit (L/C) mechanism. The L/Cs will be non-transferable but divisible and assignable. The department has stipulated that all L/Cs should be opened after taking the approval of the board and only after receipt of the performance guarantee and a copy of the signed contract.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.