`We will adopt a cautious approach on the Hanumantha Rao committee recommendations as it could have far-reaching consequences,' fertiliser minister SS Barnala told PTI here.

The report will have to be evaluated from all angles, Barnala said adding he favoured continuation of fertiliser subsidy, now running into Rs 8,000 crore, for some more time.

Any decision on the report seeking a cut in subsidies along with radical changes in its pricing structure will be taken only after extensive interaction with various groups, he said.

Meanwhile, the Fertiliser Association of India (FAI), the apex body of manufacturers, warned the government that implementation of the report in its present form would have `serious consequences' for growth prospects in the industry.

The FAI warned the government that anypolicy decision based on the committee's recommendations will threaten the viability of efficient plants and substantially increase losses of sick units.

`The policy package based on the long run marginal cost (LRMC) principle will threaten the viability of a majority of the efficient plants, affect the viability and cash flow of projects under implementation and discourage fresh investment,' FAI said in a note submitted to the fertiliser ministry.Viability of several gas- based plants, all naphtha/coal based plants and all but one fuel oil/LSHS based plants will be seriously eroded if the uniform normative referral price (NRP), as suggested by the panel, is adopted.

It further said a majority of plants would face liquidity problems. While newly commissioned gas-based plants will have difficulties even in meeting their repayment obligations, a number of naphtha and fuel oil- based plants will run out of the money even to pay for the costs of inputs.

`The LRMC principle is unacceptable to the industry,'FAI director general Pratap Narayan said adding even the recommendations of the high-powered committee of secretaries for a shift towards uniform pricing for existing units was not accepted by the government.

FAI said the committee's recommendation for a guaranteed price for a period of 15 years for new units will not attract any fresh investment as the indicated price levels are grossly inadequate.

The fate of recently commissioned projects and those under advanced implementation stage will be uncertain, it said.

On the panel's recommendation regarding deregulation of the industry while sticking to the ceiling levels, it said the suggestion was contrary to the spirit of deregulation and free market.

The committee's observation that the retention and subsidy (RPS) mechanism allowed unrestricted entry of high cost producers and did not allow old units to generate surpluses were `unwarranted and unjustified.'(PTI)