Both the farmers and the manufacturers of fertilisers are eagerly looking forward to a positive and practical provision in the ensuing budget
The domestic fertiliser industry has continued to suffer due to low or restricted availability of gas, the production of which has not increased in recent months with the chances of its increase continuing to be dim. In fact, the three urea makers in the South, which had used naphtha as feeder stock, shut down in October last year, when the union government stopped its subsidy, and restarted their plant on the assurance that subsidy will continue for the next three months!
This is an act of folly by the government. The reason they stopped the subsidy was that these units had not laid the pipelines to connect them with gas, without admitting that there is no gas in the first place to supply! Instead of doling out subsidy in this manner, first step should be to reassure these three units continue to get the subsidy until they are able to provide the required quantum of gas. The only stipulation that the government may impose, is a timeframe within which these units ought to be able to have their pipelines ready for the gas connection. At the same time, the government must also assure them the time within which this gas supply would be made possible!
In the meantime, as we come closer to the Budget announcement, both the farmers and the manufacturers of fertilisers are eagerly looking forward to a positive and practical provision in the ensuing budget, exactly 10 days from now!
Will this be part of the key economic reforms that the Finance Minister, Arun Jaitley has promised in his maiden budget, almost one year ago? This remains to be seen.
It may be remembered that the basic policy of National Democratic Alliance (NDA) government has been to keep itself pro-farmer and this has been reiterated by one and all, including, Ananth Kumar, the Union Minister for Fertilisers. He has been assuring a National Fertiliser Policy, but so far, nothing has been announced, though, we now have a lurking suspicion that this may about, after the Budget presentation.
There has been speculation that as a sequel to the Budget, certain major changes in the current fertiliser policy, like the phased withdrawal of maximum retail price (MRP) for urea or even an incremental increase in its price may be brought about.
It may be remembered that for almost eight years, between 2008 and 2010 the urea price was constant at Rs4,830 per tonne and this was increased to Rs5,310 in the later part of 2010 and revised to Rs5,360 in 2012. Because of its subsidised price, urea is the cheapest fertiliser in the market. Because of this, farmers tend to use this excessively, as per some soil experts, who claim that this has caused erosion and soil fatigue.
Soil experts, it is reported, feel that in the interest of soil protection, farmers need to apply the essential and balanced use of NPK - nitrogen, phosphate and potash nutrients to retail its natural qualities.
The most commonly used fertiliser continues to be urea which alone has the statutory price control and the MRP is fixed by the government. This is based on the ‘actual’ cost of production of each producer and the subsidy, being the difference in cost of production and the MRP is paid by the government. The Fertiliser Ministry, in consultation, with the individual manufacturer determines the production cost for each plant.
But the general feeling of the industry has been that it is time that the government seriously considers the decontrol of the urea price, though the Centre wants an administered price control is essential, because it wants to be ‘farmer friendly!’.
Another issue that has been brought to the notice of the government, by soil experts, is the indiscriminate and reckless use of urea, being the cheapest source of fertiliser available. Educating the farmer has become imperative and one way of controlling this excessive usage is to either decontrol the price completely or introduce some sort of slab rated increase in price.
If an increase in the MRP is considered not feasible, why not bring about a formula by which, the manufacturer is able to sell the excess produced in his plant, over the installed production capacity, at a free market determined price? In other words, if a plant has an installed capacity of say 1.3 million tonnes, which is considered a viable unit, any excess production over 1.3 million tonnes be free of MRP! For this quantity, government need not give any subsidy!
Since MRP has not had any change since 2012, a marginal upward revision could be effected to ascertain the market reaction. In any case, the subsidy element should be directly credited to the bank account of farmers, who by now, thanks to Aadhaar Card, may have opened bank accounts! Let the revised formula work at least for one year and can be reviewed before the next Budget. At the same time, through the medium of TV channels, the correct use NPK should be publicised and stocks of NPK fertilisers should be available in all village panchayats and similar bodies.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)