The industry's demand is in response to the government decision to reassess plant capacities to detect instances of understatement and when proved give lower compensations to erring units. Producers are also unhappy with the ``general belief'' that the industry was responsible for the burgeoning subsidy bill.

Speaking to The Financial Express, Fertiliser Association of India director general Pratap Narayan said that while the industry was being lambasted for high capacity utilisation, nobody was actually noticing that profitability of units was either lower or at best what it should have been at normative capacities. "Had the industry operated at normative capacity, it would have got only nominal profit and in some cases might have even suffered losses".

The industry did not want to be involved in the process of subsidy distribution any more as it was being considered guilty of misusing the process, Narayan said. "Since there is a general feeling that we are the main beneficiaries of fertiliser subsidy, we have told the fertiliser minister that the industry will prefer decontrol."

Narayan said that the industry was being battered with condemnation without anybody actually bothering to know the mechanics of pricing or analysing factors responsible for the bulging subsidy. He pointed out that subsidy was not fixed by itself and in fact was a function of two sets of prices which include consumer price fixed by the government and the cost of production and distribution (feed stock, utilities and services), also fixed by the government as they are provided by government agencies.

He added that subsidy had increased tremendously because of the government's reluctance to suitably adjust the consumer price in line with increasing costs. Moreover, the fact that the government was not controlling the artificial increase in cost of production and distribution was another reason for heavier subsidy burden.

In the last 20 years, naptha prices have increased by almost 22 times. Fuel oil prices have also increased 12 times while gas prices have increased by 9-12 times. Prices of urea, however, have only tripled, Narayan pointed out.Other factors like depreciation of Rupee and application of customs duty on finished products, raw materials and project imports also jack up costs.

"This is contrary to the recommendation of the joint parliamentary committee recommendation". Narayan pointed out further that railway freight has also gone up several times in the last few years. In the recent Railway budget, freight rates for decontrolled fertilisers went up by 48 per cent over the previous year.

"Despite these facts, if the government considered the industry to be the beneficiary, the solution will be to deregulate prices and give subsidy to the farmers directly, " Narayan said.

A number of units, especially those based on naptha and fuel oil, may have to close down as a result, but Narayan said that it was a preferable situation as the industry would know where it stood. "At present there is a lot of uncertainty surrounding the industry because of frequently changing policy decisions. If the industry is decontrolled, at least we will be able to grasp the entire situation and take decisions accordingly."