Cabinet approves concession scheme on decontrolled P

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New Delhi, Jun 26 (UNI)In a major support to the beleaguered industry, the Cabinet Committee on Economic Affairs (CCEA) today approved new Concession Scheme for phosphorous and Potash (P&K) fertilizers. This move has brought the quantum of concessions for indigenous DAP at par with the imported DAP and acceding the manufacturers demand for pricing the potash at normative rate, basing on the cost of imported stock.

Briefing mediapersons, Minister of State in PMO Prithviraj Chavan said the new Concession Scheme, a revised framework, applicable to DAP, MOP, MAP and 11 grades of complex fertilizers from April first this year, is based on a fresh cost price study conducted by Tariff Commission and long-term approach as suggested by the Expert Group, headed by Prof Abhijit Sen.

The Concession Scheme is substantially based on the recommendations of the Tariff Commission for computing input cost, conversion and handling charges.

The new features of the Concession Scheme are: -- Indigenous DAP is brought at par with imported DAP for purposes of calculation of concession. Providing concession to indigenous DAP on the basis of Import Parity Price (IPP) will ensure competitiveness and provide a rational basis for payment of concession.

-- The pricing of 'P' which was hitherto determined on the basis of negotiated price of phosphoric acid by the industry will now be arrived at through a normated price on the basis of Expert Group formula for determining 'P' based on the delivered cost of imported/indigenous DAP.

-- The pricing of 'N' nutrient which has been identified by the Tariff Commission as the major determinant in different costing of complex fertilizer, will henceforth b adopted and unit wise 'N' will be recognised as estimated by the Tariff Commission for two years (effective from April 1, 2008 to March 31, 2010) and thereafter unit wise or group wise price of 'N', whichever is lower, will be adopted resulting in saving to subsidy.

--The recommendations of the Tariff Commission to provide concession/subsidy on sulphur nutrient, has also been approved with a view to cushion the farmers from the impact of steep increase in international price of sulphur.

--With a view to encouraging fertilizer industry to seek out long term supply arrangement for fertilizer raw materials, intermediates and finished fertiliser products, it has been decided to introduce an 'Outlier' concept for computation of final rates by excluding such 'Outlier' where the price is lower by 5 per cent or 30 US dollar vis-a-vis the industry average. The difference between the industry average and 'Outlier' will be shared between the 'Outlier' and the government on 65:35 basis. While this will encoruage industry to seek long term suplies at lowr prices, the benefits of such lower cost inputs will also be shared between the importer and the government.

-- In order to ensure availability of de-controlled fertilizer like DAP and MOP, the DOF will maintain a buffer stock of 3.5 LMT of DAP and 1 LMT of MOP to meet any exigent requirement.

-- With a view to expanding the basket of phosphatic fertilizer, it has been decided to include Triple Super Phosphate (TSP), which is a cheaper substitute for DAP in the Concession Scheme. This will not only provide access to alternative supply of phosphatic fertilizer but will also lead to savings in subsidy.

-- Similarly, with a view to encourage balanced fertilization, it has also been decided to include Ammonium Sulphate (AS) under the Concession Scheme by providing 25 per cent subsidy on 'delivered cost'.

The new Concession Scheme, however, envisages reduction in subsidy outgo to the extent of Rs 1163.79 crore based on the rationalization of methodology and costing as estimated by the Tariff Commission. This Scheme will provide a long term perspective to the fertilizer industry to seek out new and cheaper source of phosphatic and potassic raw material, intermediates and finished fertilizers and will thereby help the Indian farmers meet their nutrient requirements, Mr Chauhan said.

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