Fertiliser industry hails shift to nutrient-based subsidy regime

The fertilizer industry in the country has hailed the Centre’s move to shift from the existing product pricing regime to a nutrient based subsidy regime as mentioned in the Union budget for 2009-10.

“This year’s Union budget talks of a shift from the existing product pricing regime to a nutrient based subsidy regime. This is a welcome step for the fertilizer sector in the country which has been demanding the direct payment of fertilizer subsidy to the farmers”, SS Nandurdikar, managing director, Paradeep Phosphates Limited told Business Standard.

However, the budget does not clarify as to whether the Centre would pay the fertilizer subsidy directly to the farmers, he said.

“In the 2008-09 Union budget, there was a proposal to introduce smart cards for the farmers using fertilisers in order to enable the direct payment of fertilizer subsidy to the farmers. However, no such scheme was introduced by the Centre”, he added. Nandurdikar pointed out that the fertilizer sector was exposed to global competition after the Centre decided to fix the prices of the phosphatic fertilizers on import price parity basis rather the earlier cost-based approach from April 1, 2008.

The Central government needs to pay subsidy directly to the farmers at a time when the fertilizer industry is poised for a challenging period in 2009-10 in the wake of falling prices in the international market.

“We had also expected that the Union budget would announce the reduction in import duty on raw materials for the fertilisers from the existing 5 per cent to zero but no such measure was announced”, he said.

BD Sinha, managing director, Krishak Bharati Cooperative Limited (Kribhco) said, “The move to shift to a nutrient based subsidy regime is a welcome step. This will enable the government to know the nutrient value of each fertilizer and also boost investments in the fertilizer industry.” He however, pointed out that the budget did not meet the industry’s expectation to announce a hike in fertilizer prices by about 20-25 per cent which would have reduced the burden on fertilizer subsidy.