In a meeting of the consultative committee on Monday relating to fertiliser subsidies, members pointed out that action could not be taken against overdrawal of subsidy by urea units operating at high capacity utilisation levels under the present retention price scheme (RPS) because the department had yet to formulate an alternative broad-based, transparent and scientific methodology of determining compensation levels.

Chemicals and fertilisers minister, Suresh Prabhu assured the committee that the matter would be resolved in the long-term fertiliser policy. The long due fertiliser policy is apparently awaiting nods from various ministries including finance. The department of fertilisers had constituted a high powered committee in January'97 under the chairmanship of CH Hanumantha Rao to review the existing system of subsidisation of urea and to suggest an alternative system. It had also constituted a technical committee in November '96 to examine the cause and relevance of various cut off levels for purpose of payment of capital related charges and to assess the installed capacities of urea manufacturing units.

In April'99 an expert committee under the chairmanship of GB Purohit was appointed to identify all high capacity utilisation undertakings and recommend their reassesed capacities. The committee was also asked to work out the financial implications of reassessed capacities from different dates from which the final reassessed capacity could be implemented.

The committee suggested three methods of reassesment of capacity. The first method was to assess capacity by selecting the best one month's production from the best one year of the previous three years ending 1998-99.

The second method was to assess capacity on the basis of selecting the best one year in the previous three years ending 1998-99. The third method suggested was to assess capacity on the basis of average of three years out of the last five years eliminating the best and worst years.

Apart from the stated methods, Purohit and D Sahu, both members of the committee, worked out a separate method for reassessing based on the fact that the identical capacity of HBJ gas-based plants which was actually 1500 MTPD of ammonia according to its designer had a licenced capacity of only 1350 MTPD of ammonia. Other three members of the expert committee suggested a different method based on the actual operating data and also took into account the designed capacity and the in-built flexibilities.

The committee said that it was time that the department zeroed in on one of the methods and took appropriate actions.