Govt may cut subsidy to P&K fertilisers if MRP is unreasonable

The Centre, which is probing the cost data of fertiliser companies, today said it may restrict or stop subsidy to those firms which have fixed maximum retail price (MRP) of the soil nutrients unreasonably high.
The government has been implementing Nutrient Based Subsidy (NBS) policy for decontrolled phosphate and potash (P&K) fertilisers since April 2010. Under this policy, MRP is fixed by the fertiliser companies as per market dynamics.
With fall in international prices of P&K fertilisers, companies in June had reduced the MRP of potash, DAP and NPK by Rs 5,000 per tonne, Rs 2,500 and Rs 1,000, respectively.

"To curb the price rise of P&K fertilisers, the government is scrutinising the cost data submitted by the fertiliser companies from 2012-13 to verify the reasonableness of MRPs of the fertilisers fixed by these fertilisers companies," Minister of State for Fertilisers Mansukh L Mandaviya said in a written reply to the Lok Sabha.
The government has engaged cost accountants/firms for the scrutiny of the cost data and to submit reports on the reasonableness of the MRPs fixed by the companies, he said.
"In cases, where after scrutiny, unreasonableness of MRP is established or where there is no correlation between the cost of production or acquisition and the MRP printed on the bags, the subsidy may be restricted or denied even if the product is otherwise eligible for subsidy under NBS," he said.

In proven case of abuse of subsidy mechanism, the fertilisers ministry on recommendation of Inter-Ministerial Committee, may exclude any grade/grades of fertilisers of a particular company or the fertiliser company itself from the NBS scheme, he said.

Since P&K fertilisers are under open government license, Mandaviya said the production and sale of these fertilisers are basically the commercial decisions of the companies. The government doesn't interfere in decisions of the companies.
"However, the government is promoting use of Single Super Phosphate(SSP) which is a low cost indigenous fertiliser and substitute for Di-Ammonium Phosphate (DAP)," he noted.
Recently, the government has removed the minimum production criteria for SSP manufacturers to be eligible for subsidy under the NBS Scheme.

Earlier, the SSP manufactures had to produce half of their installed capacity or 40,000 tonnes, whichever is lower during the production year, to be eligible for subsidy under the NBS Scheme.
In addition to that the government is also allowing marketing arrangements between the SSP manufacturers and registered fertiliser companies to enable the SSP manufacturers to sell their products through a larger marketing network of the bigger companies.
After implementation of the NBS Scheme, subsidy outgo is going down year by year. The subsidy outgo on P&K fertilisers is estimated to be Rs 18,999.99 crore in 2016-17 fiscal as against Rs 21,937.56 crore last year, he said.