The proposal to provide concessions through an ad hoc subsidy, which was mooted by the committee set up to design the fertiliser policy and suggested by the Fertiliser Association of India, has already got the approval of the agriculture ministry. The move, once implemented, will lead to an additional subsidy outgo of around Rs 200 crore, say ministry sources.

The concessions proposed on the sale of AS, ACL and CAN are Rs 1,545 per tonne, Rs 1,875 per tonne and Rs 1,950 per tonne, respectively. The concession pattern will be similar to that provided on other decontrolled fertilisers, except that retail prices of these fertilisers will be permitted to be controlled by market forces.

Even without accounting for theproposed concession on these low-analysis nitrogenous fertilisers, the subsidy burden is expected to swell to around Rs 11,000 crore for fiscal 1998-99, against Rs 10,500 crore last year.

These low-analysis nitrogenous fertilisers were decontrolled in 1991, and brought back under the retention price scheme a year later. They were once again decontrolled in June 1994, removing them from both the retention price scheme and from the ad hoc subsidy scheme. This has put these fertilisers at a price disadvantage compared to urea, a nitrogenous fertiliser which is under control.

Major producers of these fertilisers are Steel Authority of India Ltd, Gujarat Narmada Valley Fertilisers Company, Tuticorin Alkali Chemicals, Fertilisers and Fertilisers and Chemicals Travancore and Punjab National Fertilisers.

The total production capacity of these three low-analysis nitrogenous fertilisers stands at 10.24 lakh tonnes. Consumption of AS, ACL and CAN during 1997-98 stood at 6.06 lakh tonnes, 1.04 lakh tonnes and 4.01lakh tonnes each. The nitrogen content in these fertilisers is in the range of 20-25 per cent.

The demand of the three fertilisers had slumped to the extent of 30-40 per cent after the decontrol with the price at around Rs 4,500 per tonne being higher when compared to urea, said industry analysts.

The government had received representations from manufacturers and state governments to support these fertilisers with concessions. The industry finds justification in the proposal to the extent that these fertilisers will now be available to farmers at cheaper rates.

The high-powered Review Committee on Fertiliser Pricing Policy noted that apart from establishing parity between major fertilisers it is imperative to give a fair price treatment to these low-analysis nitrogenous fertilisers as these are crucial for specific crops and supply essential micro-nutrients like sulphur and calcium in addition to nitrogen.

AS is mainly used to increase the yield in wet land paddy and crops like tobacco, sugarcane,etc. CAN is mainly used as a substitute for nitrogen in the soil for fruits and other vegetable plantations.

The committee has recommended that subsidy on low-analysis fertilisers should be arrived at with reference to their nutrient content. The department of fertilisers, which was initially not in favour of such a concession, has extended its support on the proposal, said sources. However, the department of fertilisers is of the view that such a scheme is to be operated by the department of agriculture and cooperation which also administers the concession on other decontrolled fertilisers.

Sources said that since manufacturers are incurring losses in the range of around Rs 1,439 to Rs 5,000 per tonne on the sale of low-analysis fertilisers, providing full subsidy will not be possible owing to financial constraints.

INSIGHT
Government must decontrol sector

By not decontrolling urea the government is now forced to provide for higher subsidies on other fertilisers. It is because of theprice advantage in urea that its consumption has increased and that of the other fertilisers has taken a beating. Though CAN, AS and AL are decontrolled, manufacturers have to price it in such a way that the farmer will be tempted to buy the product. Under such circumstances the demand of fertiliser units to give some sort of shelter is justified.

By providing subsidy to these fertilisers, the government will be literally controlling the whole sector in one way or the other. It will then be a populist political decision to remove the subsidy from these fertilisers. The recent black market prices in Punjab prove that farmers are able to purchase fertilisers at substantially higher prices which will not require any subsidy. Rather than sinking further the government should best start decontrolling the sector.