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FERTILIZER PRICING POLICY in India
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FERTILIZER PRICING POLICY THE CURRENT FERTILIZER PRICING POLICY OF 2003-2004 PLUGS LOOPHOLES AS EXPLAINED BELOW: We did not expect the budget to take a bold measure like trying to increase the farm gate price of urea just a couple of years before the general elections-Unlike all expectations from the budget which was more from the revised retention pricing norms for manufacturers, the finance minister proposed an increase of Rs 240 per tonne in the farm gate prices of urea and Rs 200/ tonne for DAP and MOP. Complex fertilizer prices are to be altered to suit to the proportion of the NP mixes. This measure has been proposed to fill the expected gap in the subsidy costs of naphtha and gas feedstock. This is a much-needed measure but is not sure how the government will be able to overcome these implications on the social and political arenas. As this is a subsidy element and is a part of the budget finances, no impact is expected on any of the manufacturers of fertilizers. Considering the relative demand inelasticity of these products in a favorable monsoon environment, we are almost sure that there will no demand gaps, as a result of this measure. Rock Phosphate, Crude Sulphur and inputs for Phosphoric acid have also been exempted from Special Additional Duty (SAD) of customs for the sake of uniformity and this was a demand from the industry and a pricing anomaly as phosphoric acid is already exempted from SAD. Given the importance of fertilizer pricing and subsidization in the overall policy environment impinging on the growth and development of the fertilizer industry as well as well of agriculture, the need for streamlining these policies has been felt for a long time. A High Powered Fertilizer Pricing Policy Review Committee (HPC) was constituted to review the existing system of subsidization of urea, suggest an alternative broad-based, scientific and transparent methodology, and recommend measures for greater cohesiveness in the policies applicable to different segments of the industry The primary consideration and goal of the new pricing policy is to encourage efficiency parameters of international standards based on the usage of the most efficient feedstock, state-of-art technology and also ensure viable rate of return to the units. The new scheme came into effect from 1.4.2003 and will be implemented in stages. It promotes production efficiency through cost saving measures and efficient economic practices at par with international norms by domestic urea producers. Stage-I is of one-year duration, from 1.4.2003 to 31.3.2004. Stage-II would be of two years duration, from 1.4.2004 to 31.3.2006. The modalities of Stage-III would be decided by the Department of Fertilizers (DOF) after review of the implementation of Stage-I and Stage-II. Under the new Scheme, there will be no capping on production of urea. The use or sale of by-products such as ammonia, CO2 etc. will be permitted in case considered surplus beyond the reassessed capacity for urea production. The final concession would be determined on the reassessed installed capacity. The additional production beyond the installed capacity would receive concession if it were mopped up under the ECA allocation.
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