GSFC takes the Department of Fertilizers to court over subsidy issue

Approaches Delhi High Court, which stays recovery of subsidy from the company

The tussle between Gujarat State Fertilizers and Chemicals Ltd (GSFC) and the Department of Fertilizers, Government of India over the suspension and recovery of fertiliser subsidy from the former has turned into a legal battle now.

The public sector fertiliser major has filed a writ petition in the Delhi High Court, which has issued a notice to the Department of Fertilizers and also stayed the recovery of subsidy from the company till the next order, the firm informed in a filing to the stock exchanges on Friday.

“The matter is now pending before the High Court of Delhi,” GSFC stated.

“In our petition, we have argued that the order directing the discontinuation of subsidy under NBS (nutrient based subsidy) policy and recovery of the same from backward effect is not as par the NBS policy. On this, the court has issued a notice to the department and has posted the matter for further hearing,” said a GSFC official.

In its statement, GSFC further informed that the Department of Fertilizers had sought not only to recover the subsidy on ammonium sulphate (caprolactum grade) fertiliser produced by GSFC under the NBS scheme, but also to stop the same on the said fertiliser.

The Department of Fertilizers, which falls under Ministry of Chemicals and Fertilizers, Government of India, had alleged GSFC of not passing on the subsidy benefit to farmers, in spite of claiming the subsidy under NBS policy.

In its letter on March 18, 2013, the department had noted that in spite of getting subsidy under NBS Policy, the maximum retail price (MRP) fixed by the company continued to remain at same level.

The government examined the matter as well as the financial details submitted by the company last year. Thereafter, the government decided to recover the subsidy already paid to GSFC on ammonium sulphate with effect from April 1, 2010 till date, and not to pay any further subsidy to it against any remaining or future claims on this grade of fertilizer.

This triggered a tussle between the company and the fertiliser ministry. The firm alleged that through such order, the department acted against the interest of farmers.

Criticising the Centre’s move, the company termed it arbitrary and unjustified. The firm claimed it sells the cheapest ammonium sulphate in the market at Rs 7,500 a tonne (in Gujarat), which is lower than that of Fertilisers and Chemicals Travancore Ltd (FACT) at Rs 11,013 a tonne.

Denial of subsidy to GSFC could deprive the farmers of cheap source of ammonium sulphate as the company would be compelled to raise MRP of ammonium sulphate in line with the MRP being charged by other indigenous manufacturers.

GSFC shares ended negative on the Bombay Stock Exchange (BSE) on Friday at Rs 56.20, down by 0.5 per cent against the previous close. The share has fallen by close to 8 per cent since March 18, 2013 against the Sensex’s fall of close to 7 per cent.