The subsidy on indigenously produced di-ammonium phosphate (DAP) has been raised by Rs 500 per tonne from Rs 3,500 per tonne to Rs 4,000 per tonne. On imported DAP, the subsidy has been revised to Rs 2,500 per tonne from Rs 2,000. Muriate of potash (MoP) will now draw a subsidy of Rs 2,500 per tonne from the earlier level of Rs 2,000, while single-super phosphate (SSP) will attract a subsidy of Rs 900 as against Rs 600 per tonne. Complexes which were drawing Rs 1,500 to Rs 3,130 will now draw subsidies of Rs 2,250 to Rs 3,646 per tonne.

The subsidy already earmarked on this account in the budget amounted to Rs 3,000 crore.

Despite the higher subsidy, industry expects the increased cost of production owing to the depreciation of the rupee alone -- which is around Rs 2,200 per tonne -- may force it to raise prices by Rs 1,200 to Rs 1,500 per tonne. "DAP prices, which are in the region of Rs 8,300 per tonne, may touch Rs 9,300 to Rs 10,000 by November-December, when the rabi sowing begins," Fertiliser Association of India director-general Pratap Narayan said.

According to agriculture experts, if the industry pushes up prices by amounts varying by Rs 1,000 per tonne to Rs 1,700 per tonne, it may have an adverse impact on the consumption of these fertilisers. The consumption figures have been showing a see-saw effect since 1991-92 before the potassic and phosphatic fertilisers were decontrolled. In 1990-91 the consumption stood at 45 lakh tonnes and dropped to 36 lakh tonnes in 1996-97. This destroyed the nutrient balance in the soils till the government took some corrective measures last year and pushed up the consumption to 54 lakh tonnes in 1997-98.

Industry experts say that between October, 1997, when the DAP prices were at Rs 8,300 per tonne, and August, 1998 the rupee dollar parity on a forward cover has been disturbed to the extent of Rs 9 per dollar. Prices of DAP in the region of $240 per tonne, this works out to an impact of Rs 2,200 per tonne. "The government has covered us to the tune of only Rs 500 per tonne and the rest will have to be met through price increases," says a senior industry source.

The decision was taken by the cabinet in absence of the union minister of chemicals and fertilisers, Surjeet Singh Barnala.

Sources said that the fertiliser ministry was against the policy of abolishing the ceiling price limit for decontrolled fertilisers. The ministry stated that if this was effected, the prices of decontrolled fertilisers would go haywire and beyond the means of the farmers. There would be at least a 20 per cent spurt in prices.

Even if the global prices of fertilisers fell, it was bound to rise when India and China starts importing them in bulk. Besides as the domestic production of DAP was not cost effective, it is difficult to bring down the prices of domestic fertilisers, the sources said.

Briefing newsmen, union agriculture minister SomPal however defended the cabinet decision by saying that the government will take care to build a buffer stock of two lakh tonne of DAP and 55,000 tonne of MoP in the country to meet urgent requirements and intervention in case of such rise in prices. will facilitate greater imports to meet the requirements which has beem severely affected by the steep decline of rupee against dollar.

He said that transport subsidy will be extended to Himachal Pradesh, hill states of UP, hilly areas of West Bengal, north-eastern states, Sikkim and Jammu & Kashmir. The new policy will also give a long-term perspective to manufacturers and importers to ensure availability of phosphatic and potassic fertilisers.

Insight

Industry must play fair