The industry says that consistent failure on the part of the government to announce concession rates on time coupled with issues like involvement of states in certification of sales has led to a situation where a number of units are not even in a position to pay for the raw material.

In a representation to the fertiliser ministry, the Fertiliser Association of India (FAI) has said that the subject of industry pricing and administration of concession scheme should be transferred to the ministry of fertiliser from the agricultural ministry and the involvement of states in certification of sales should be stopped and payment should be on despatches as in case of urea.

Speaking to The Financial Express, FAI director general Pratap Narayan said that due to the delay in announcement of concessions, producers were finding it difficult to plan their production. "Producers only have intimation about the price and don't know what the concession rates would be. As a result they are not in a position to make calculations of profits, taxes, dividends etc and are not sure what the optimum level of production should be."

Although, 80 per cent of the total payment is made to the producers on the basis of the concession rates prevailing in the previous season, there is a lot of uncertainty attached as the final rates announced may be less than the provisional rates.

Giving an example of the problems that can crop up for producers, Narayan pointed out that Rabi 1998-99 rates were announced as late as March 2000 and since it was lower than the provisional rates it created a lot of hassles for the industry. "Problems cropped up because accounts had already been finalised, profits computed, taxes paid and dividend distributed for the year 1998-99 based on the provisional figures."

Another problem which the industry wants the government to address is that of the delay in payments caused by the necessity to produce proof of sales certified by the state for claiming concessions for 20 per cent of the production.

Getting certificates of sale is a time consuming and complicated process that causes a lot of harassment to producers, Narayan said. "Every sales bill has to be accompanied by invoices and a producer has to run from one office to the other to get the work done." Narayan added that the minimum time taken by the state to give its certification was six months leading to locked up payments.

In its representation to the fertiliser industry, the FAI pointed out that during Rabi 1998-99, the data of 12 companies showed that they suffered interest loss of about Rs 67 crore as 20 per cent payment was unjustifiably held up for a period of 12-17 months pending finalisation of the rate. This was in addition to the under payment to the extent of Rs 64 crore due to retrospective downward revision.

The FAI has suggested that the mechanism of setting up an empowered committee to fix prices and concessions should be revived as was done during Kharif 1997. Alternatively, FAI added, the government should notify concession rates and leave the industry free to fix farmer price in the true spirit of decontrol.