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MAJOR DECISIONS AND INITIATIVES
FERTILISERS
The UPA Government completes one year on May 21, 2005. During this period, the Government has taken several important initiatives. Some of these are being brought out in the series ‘Major Decisions and Initiatives’.
Fertilisers have played a vital role in the success of India’s green revolution and consequent self-reliance in food-grain production. The increase in Fertiliser consumption has contributed significantly to sustainable production of food grains in the country. The Government has been consistently pursuing policies conducive to increased availability and consumption of Fertilisers in the country.
Out of the three main nutrients, namely nitrogen, phosphate and potash, required for various crops, indigenous raw materials are available mainly for nitrogenous Fertilisers. The Government’s policy has hence aimed at achieving the maximum possible degree of self-sufficiency in the production of nitrogenous fertilisers based on utilisation of indigenous feedstock.
Fertiliser Units
At present, there are 57 large Fertiliser units in the country manufacturing a wide range of nitrogenous, phosphatic and complex Fertilisers. Of these, 29 units produce urea, 20 units produce DAP and complex Fertilisers, seven units produce low analysis straight nitrogenous Fertilisers, and the remaining nine manufacture ammonium sulphate as a by-product. Besides, there are about 62 small and medium scale units in operation producing Single Super Phosphate (SSP).
Revival of Closed Fertiliser PSUs
In the light of the Government’s National Common Minimum Programme (NCMP), the issue regarding the feasibility of revival of the closed fertiliser Public Sector Undertakings (PSUs), based on market demand and their techno-economic viability, has been prepared by Projects and Development India Limited (PDIL), a Public Sector Undertaking under the administrative control of the Department of Fertilisers. The revival of these units will depend on the outcome of the examination of the report of PDIL.
PDIL is expected to achieve greater heights in its performance during the coming years. The revival scheme has been approved by BIFR and the Government has extended all the reliefs and concessions envisaged in the approved revival scheme. Reliefs and concessions, as envisaged in the revival scheme, have been implemented and the net worth of the Company has become positive.
Fertilisers at Reasonable Rates
With the objective of making available fertilisers to farmers at reasonable rates, urea, a controlled fertiliser and decontrolled phosphatic and potassic fertilisers are made available to farmers of the country including the poor and marginal farmers at statutorily notified Maximum retail Price (MRP), or indicative MRPs, respectively. MRP of SSP is indicated by the respective State Governments. As the MRP/indicative MRPs are generally less than the cost of production of fertilisers, the benefit of subsidy is passed on to farmers including the poor and marginal farmers in the form of subsidised selling prices.
A budgetary provision of Rs.16,253.90 crore has been made for subsidy on Fertilisers during 2005-06. The Cost Accounts Branch of the Ministry of Finance has submitted its report on cost price study of SSP. After examination of the report, the Government is in the process of formulating a suitable methodology for working out concession of SSP.
National Fertiliser Policy
Payment of subsidy to indigenous manufacturers of urea is regulated under the provisions of the New Pricing Scheme (NPS) for urea units. Concession to manufacturers and importers of decontrolled phosphatic and potassic fertilisers is provided under the provisions of the Scheme of Concession on sale of decontrolled phosphatic and potassic fertilisers. NPS was introduced with effect from April 1, 2003, replacing the erstwhile Retention Price Scheme. NPS is being implemented in stages. Stage-1 was of one year duration, from April 1, 2003 to March 31, 2004. Stage-II is of two years duration, from April 1, 2004 to March 31, 2006.
A Working Group has been constituted on December 10, 2004, under the chairmanship of Dr. Y.K.Alagh to review the effectiveness of Stage-I and II of New Pricing Scheme (NPS) for urea units and to formulate a policy for urea units for Stage-II. The Working Group would also examine issues pertaining to formulation of feedstock policy especially with regard to nature, pricing and availability, demand and supply of urea upto the end of XI Five Year Plan, fixing milestones for conversion of existing naphtha and FO/LSHSS-based units to NG/LNG, mode of determination and methodology of payment of concession to urea units, de-control of movement and distribution of urea, balanced fertilisation through urea pricings etc. The Working Group has been asked to submit a report within six months from the date of its constitution.
A policy has been announced for setting up new urea projects and expansion of existing urea projects for augmenting the domestic production capacity of urea to meet the growing demand for enhancing the agricultural production in the country. The new and expansion urea units will be based on natural gal/LNG as feedstock which is the most cost effective and the least polluting feedstock in fertiliser sector today. The new policy will enable the entrepreneurs to decide about their investment plans in the fertiliser sector.
Policy has also been announced for de-bottlenecking/revamp/modernisation of existing urea units, which will be allowed only if the additional production is by using natural gas/LNG as feedstock.
The Government has also formulated a policy for conversion of existing naphtha/FO/LSHS-based urea units to natural gas/LNG as feedstock. The plants based on naphtha/FO/LSHS are less energy efficient and have a higher production cost. Therefore, the policy encourages an early conversion to natural gas/LNG so that they acquire a competitive edge in the deregulated and liberalised economic scenario. With a view to encouraging investments for switchover to NG/LNG as feedstock, the investor is assured that savings on account of energy efficiency after conversion would be retained by the plants for a maximum period of five years in respect of naphtha-based plants and 10 years in respect of FO/LSHS based plants.
Availability of Fertilisers
Department of Fertilisers (DOF) is taking all necessary steps and closely monitoring with the State Governments the easy and timely availability of fertilisers. This was reflected in the higher sale of major fertilisers. The sale of Urea (205.49 lakh MT), DAP (60.77 lakh MT) and MOP (23.10 lakh MT) has registered an increase of about five per cent, 10 per cent and 40 per cent respectively, during the year 2004-05, as compared to the sales of Urea (195.8 lakh MT), DAP (55.2 lakh MT) and MOP (16.47 lakh MT) during 2003-04. Production of urea and complexes also has been at the highest ever level. Sale of Urea and MOP has also been the highest ever.
All the major fertilisers were made available to the farmers in the country at the same prices as prevailed during 2002-03, despite hike in the overall prices. The Government has borne additional burden of subsidy to the tune of approximately Rs. 3,000 crore during 2004-05 keeping its commitment to give the highest priority to agriculture.
RK:LV
PIB SF-55 (19.5.2005)
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