Ministry mulls cut in DAP subsidy by Rs 250 per tonne
Namrata Singh
MUMBAI, January 18: The ministry of agriculture is considering a reduction in the ad-hoc subsidy of diammonium phosphate (DAP) fertiliser by Rs 250 per tonne. The current ad-hoc subsidy on indigenous DAP is Rs 3,750 per tonne and that on imported is Rs 2,250 per tonne. The farmer's price (after subsidy) is around Rs 8,300 per tonne.The proposal of reducing the subsidy before the ministry has been under consideration for a month now, according to industry sources. However, sources said the industry, backed by the ministry of fertilisers & chemicals, has come down heavily with strong objections to the proposal. At present, a dispute of sorts is brewing between the two ministries but some decision is likely to emerge by the month-end, sources said. The ministry of agriculture had earlier put up a proposal to reduce the ad-hoc subsidy on both imported and indigenous DAP by around Rs 500 per tonne, sources said. However, due to strong resistance from the industry, the proposal was modified. They said that awidespread undercutting in the price of DAP was noticed last year, and hence the Centre was forced to consider a cut in the subsidy. The move to cut the subsidy also stems from the fact that the Centre has yet to disburse some Rs 700 crore to the industry as subsidy due for the rabi season. There has been a delay in disbursement of the subsidy to the manufacturers due to shortage of funds, sources added. Last year, the government centralised pricing for all fertilisers, except SSP, so as to avoid delays in payment of the subsidy. The Centre also decided to pay 80 per cent of the concessions directly, with the balance left to be paid by the states. The proposal to reduce the subsidy comes at a time when the rupee has depreciated to Rs 40 against the dollar. This would make imports even more costlier rendering the price of imported DAP uncompetitive in the domestic market. To add to the burden, raw material prices and freight rates have also gone up. Major producers of decontrolled fertilisers include
Deepak Fertilisers and Petrochemicals, Zuari Agro, Dharamsi Morarji Chemicals company, Rama Phosphates, EID Parry and SPIC among others. Others like Rashtriya Chemicals & Fertilizers (RCF) have also started trading in DAP. The fertiliser industry is partially decontrolled with phosphatic and potassic fertilisers, like single super phosphate, DAP and complex fertilisers, subsidised on ad-hoc basis. Urea is the only controlled fertiliser. The subsidy burden of the Centre has been ballooning and has increased from Rs 4,800 crore in 1990-91 to Rs 7,767 crore in 1996-97. Following the decontrol of the phosphatic and potassic fertiliser industry in August 1992, ad-hoc concessions were immediately introduced. Mumbai, Jan 18: The rupee fall has hit diammonium phosphate (DAP) fertiliser imports. As against imports of 14 lakh tonnes of DAP in kharif last year, negligible imports fructified in the current rabi.Industry sources said DAP imports have slowed down tremendously due to the depreciating rupee which couldlead to a shortage of the fertiliser in the coming kharif season. This is despite the fact that international prices have slumped due to a glut in the global market. DAP prices dropped from $250 per tonne to $235 in December 1997. The industry fears that the situation will result in a shortage of DAP, which is a crucial basal dose for the crops, as companies are not coming forward to contract imports at a time when the rupee has touched Rs 40 against the dollar. Among companies, which usually contract DAP imports, Paradeep Phosphates Limited (PPL) is an active player.Large scale DAP imports in the previous kharif were largely due to the lower international prices coupled with higher demand. As against the previous year, DAP imports in kharif 1996, was only 5 lakh tonnes. On an annual basis, India imports 12 lakh tonnes of phosphoric acid, 6 lakh tonnes of ammonia and a similar quantity of sulphur which go into the manufacture of DAP. The total demand for DAP in a season is close to 20 lakh. The demandfor DAP had gone up after the centre increased the subsidy in June last year. The hike in subsidy, and the subsequent increase in demand, was aimed at rectifying the distortion in the NPK ratio of the soil.The demand for DAP dropped after the fertiliser was decontrolled in August 1992. Later, an ad-hoc subsidy of Rs 1,000 per tonne was introduced, which was later raised to Rs 3,000 per tonne in 1996, and to Rs 3,750 per tonne last year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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