Fertiliser Industry seeks Import Parity Price for investment

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New Delhi, Dec 8 (UNI) With the Indian Fertiliser Industry finding hard to survive after withdrawal of protection in the liberalised era, it has pleaded the government for accepting import parity price (IPP) for their domestic production till low Maximum Retail Price (MRP) fixed for the farmers is not completely done away with.

Also, the industry, virtually losing its entrepreneurship over two-decade long protection that ensured 16 per cent net profit margin, has now been demanding some concessions or restoration of protective umbrella in name of facilitating new investment in the sector for creating self-sufficiency in domestic fertilisers production.

These demands are allowing of debottlenecking of existing plants having potential of adding three million tonnes of urea capacity in a short time and at minimum investment and notifying of non-gas based urea units for their conversion to cheaper gas fuel.

''The industry would prefer a liberalised policy based on international benchmark like IPP. And, if the government wants to continue with the cost-based approach for determining the reimbursement to units from the subsidy bill(which is the difference between cost of production and MRP), it should ensure reasonable return to the industry, said Fertilisers Association of India(FAI), an apex body of the industry, Chairman U S Jha.

The government has already appointed Tariff Commission, currently studying afresh the cost-price for P and K fertilisers.

Domestic production and capacity of the industry is almost stagnant with productiion of N and P nutrients grew by nine per cent only through overstretching the capacity utilisation during 2000-01 to 2006-07, at 32.5 million tonnes when the consumtpion rose by 30 per cent, crossing 40 milion tonnes. At present the gap between domestic production and consumption is around eight to 10 million tonnes which is being filled up by imports.

Mr Jha told mediapersons that international prices of urea rose to 400 dollar per tonne and DAP to 630 dollars a tonne and MOP to 360 dollar per tonne only because India, the biggest consumer of fertilisers, had gone for shopping abroad.

As a result India had to pay much more price than the government had been paying to domestic manufacturers.

And, instead of shelling out extra money to foreign producers why the Indian government facilitate cheaper domestic production and create conducive atmosphere for fresh investment in the sector, Mr Jha questioned.

If the government continue to be dillydallying, the gap between the domestic production and the consumption would rise to 16 million tonnes by the end of 11th Plan. And, the country will find it difficult to procure required stocks from the global market even at further jacked up prices.

Mr Jha said the current farm gate cost of imported urea and DAP was at Rs 17,000 and Rs 27,000 per tonne -- much higher than the average cost of their domestic counterparts at about Rs 12,000 and Rs 19,000 per tonne respectively.

''The most suitable alternative under the present situation for assured supply of fertilisers is to strengthen the domestic production base,'' Mr Jha said, adding that the government should facilitate long-term availability of feedstock for urea and raw material for P and K sector at reasonable prices. This include the industry demand for allocation of APM gas on priority basis and forward and backward integration of raw material supplies for Phosphatic rock and Phosporic acid.

But cut-up over the ballooning 'fertiliser subsidy bill' touching Rs 50,000 crore during the current year, the official in the Department of Fertilisers are interpreting the industry's demands as an attempt to 'restore protection' of bygone days instead of looking for competitive avenues to survive in the liberalised regime.

On the other hand, the Industry is opposing the government proposal for issuing 'fertiliser bonds' to the tune of Rs 7500 crore instead of hard cash payment of subsidy arrears. Also, the industry is taking 'shelter' behind argument that the country's food security' could only be ensured with higher domestic foodgrain production which, in turn, needs steady dose of fertilisers -- perhaps this plea may not cut ice with the policy makers who had already gone for import of wheat -- along with imports of pulses and edible oils.

UNI

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