The only consolation for those against imports is the quantum of urea that is needed to be imported into the country year after year. Bureaucratic circles are sceptical over the implementation in any substantial measure of the high-level Hanumantha Rao Committee recommendations on the fertiliser pricing policy.

As of now, the exact figures for the current year's urea import needs are not available. However, sources in the commerce ministry in-charge of the Minerals and Metals Trading Corporation (MMTC) activities, have clarified to The Financial Express that the MMTC has to import about 2.5 lakh tonnes of urea by September this year. This is as per the import schedule drawn up around April this year and effective till around September 1998. Decisions regarding any further imports beyond September 1998 will have to be made later by the government,say commerce ministry sources.

MMTC's slated import of around 2.5 lakh tonnes of urea by September 1998 is besides whatever imports have been made by other canalising agencies which include the State Trading Corporation. These sources, however, declined to make any comments on the import price factor or the projected demand factor for urea this season on the pretext that higher authorities and agencies looking into these issues.

Why is the focus always on urea always?

The first and foremost question that appears to pop up while discussing the urea import issue is: Why this sharp focus on urea always? Is it just because of the not-so-distant urea scam of the Narasimha Rao regime or something else?

Far from the scam issue. Urea gets focussed always for the the two simple facts that urea is not only a controlled item but also there has always been traditional shortage of this commodity in the Indian market. Besides, urea is the only controlled commodity among fertilisers. Fertiliser units other than ureaproducers are free to fix their own selling prices. In the case of urea it is the government which decides the prices and movements.

No matter at what cost the urea producers produce the commodity and no matter what raw materials -- whether naphtha or liquefied natural gas etc -- they use and no matter whether they belong to the public sector or private sector, the selling price of urea in India has to be the same as fixed by the government.

For that matter, even the imported urea has also to be sold at the price fixed by the government irrespective of whether the importers have got urea at a cheaper price or whether they have incurred higher transportation costs and so on. The importers in any case being public sector agencies like STC and MMTC, the cost factor does not seem to be getting too much projected as they are being reimbursed by the government so as to enable the agencies to sell urea at the price fixed by the government.

The price factor:

Irrespective of the fact as to whether ureaprices are falling or rising in the international markets, so far as India is concerned, the country has been a traditional urea importer. Only the quantum may differ from year to year depending on the demand and supply position in the domestic market, according to sources in the Delhi-based Fertiliser Association of India (FAI).

Ever since 1981, the Indian farmer had been buying urea at controlled and therefore stabilised prices. It was only in 1991, urea prices got into the periodical upward revisions from time to time. While in 1991 urea prices were revised upwards by 40 per cent, in 1996-97 they were raised further by 10 per cent to touch Rs 3,660 per tonne, according to sources at FAI. This Rs 3,660 per tonne price that the Indian farmer has been paying at the outlets has been thirty to fifty per cent less than the cost of production or the cost of importing urea.

Compensation:

Having said that urea is being sold to the Indian farmer at a price which is much less than the cost of production,it is essential here to clarify that urea producers have been compensated for the differential between their cost of production or cost of import and transportation from the shipyards in the form of price reimbursement mechanism.

In other words, if one takes the example of 1997, the cost of urea came to about Rs 7,560 ($ 210 per tonne) per tonne plus another Rs 1,500 odd for transportation etc.

Urea producers have not felt the pinch because of the government's retention price scheme by which the producing units have been getting their cost reimbursed.

What ought to have been done:

While on the pricing front, one should mention here that the high-level panel on fertiliser pricing policy under the chairmanship of CH Hanumantha Rao had recommended in April this year that the present system of retention pricing policy has to be discontinued. Instead, the committee had opined that the fertiliser units should be allowed to fix their retail prices subject to a ceiling of farmgate price (FGP). Thecommittee had also recommended that the entire process of fertiliser industry had to be deregulated and FGP price be announced annually to enable farmers to get fertilisers at affordable prices.

The committee which submitted its report to the government in April 1998, had also recommended that debt to equity ratio of the fertiliser industry had to be determined by the market forces instead of the present normative referral price (NRP) basis. The committee had also suggested NRP for urea at Rs 6,050 per tonne as on January 1, 1998. After including dealer's margin, this price would become Rs 6,500 per tonne, the committee had said.

Irrespective of whether the government has accepted the Hanumantha Rao committee recommendations or not, the bureaucratic circles in Delhi seem to be quite septic regarding the government's stand in this regard. The recommendations, according to one such view, have been more or less rejected. Even if they are implemented, complete deregulation of the fertiliser industry does notseem to be on the cards, say sources.