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Saddled with an ever-increasing burden of fertiliser subsidy, the finance ministry has proposed rationalisation of the subsidy disbursal system as a priority for the new government.
According to officials close to the development, the subsidy bill has already reached Rs 70,000 crore, including special lines of credit in the form of concessional bank loans for payments to indigenous urea companies. Therefore a series of measures to cut down the subsidy has been worked out and could be placed before the new government.
One of the measures proposed is reduction of subsidy given on “on-account” basis. Currently the government disburses almost 85 per cent of the subsidy in fertiliser upfront, once the stock is offloaded at the point of sale, that is, with the dealer. The rest is disbursed once the actual sale of fertiliser is done. Now the ministry proposes to reverse the process by disbursing 30 per cent of subsidy upfront and rest upon actual sale of fertiliser.
The Ministry also proposes to abolish secondary freight subsidy given to far-flung states in the north east and Jammu and Kashmir for delivery of phosphates and potash (NPK) fertilisers. The movement of fertilisers from port or plant by railways to various rake points is called primary freight and the cost is reimbursed on the basis of railway receipts. Secondary freight is the transportation of fertilisers from railway rake points to district headquarters, and was around Rs 300 per tonne. It was scrapped by the government in 2012. However, the government provides freight subsidy on direct road movement of phosphates and potash (P&K) fertilizers from plant or port to the district headquarters as per actual distance to maximum distance of 500 km in far-flung states. This forms part of the secondary freight which is still in practice, but the current proposal is for doing away with it.
On an average, India consumes about30 million tonnes of urea and 25-26 million tonnes of DAP (Di-Ammonium phosphates), MoP (muriate of potash) and complex fertilizer a year.
Recently, the department of fertilizer has made it compulsory for fertiliser companies to certify the correct price of their products entered in the online fertiliser monitoring system of the government while claiming subsidy on potash and phosphorous fertilisers. The decision was taken while assessing the huge difference between the prices quoted on FMS and the actual market price (MRP). To be specific, based on this decision, there could not be any discrepancy between MRP printed on the bags and that reported on the FMS.
Except for urea, prices of all other fertiliser categories, including potash and phosphates, have a fixed-subsidy component and so the price keeps fluctuating. In 2011-12, there was a substantial increase in the prices of non-urea prices. DAP was Rs 11,000 a tonne at the beginning of the kharif season in May-June and was later increased to Rs 18,500. Since April 2010, when the government decontrolled non-urea fertilisers, the price of DAP has almost doubled from Rs 9,350 a tonne at the time.
Thus a review of the non-urea fertiliser prices was called last year, to check the abnormal increase, as much of the imported stocks left unsold as farmers could not afford the price. At the same time, manufactures were reluctant to decrease prices.
