Fertilizer subsidy expected to more than double in FY09

Fertilizer subsidy expected to more than double in FY09
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First Published: Tue, May 27 2008. 10 31 PM IST

Helping hand: Union minister Ram Vilas Paswan has said DAP imports are likely to be 6.5mt this year against 2.9mt last year. (Photo: Madhu Kapparath / Mint)
Helping hand: Union minister Ram Vilas Paswan has said DAP imports are likely to be 6.5mt this year against 2.9mt last year. (Photo: Madhu Kapparath / Mint)
Updated: Wed, May 28 2008. 04 55 PM IST
New Delhi: India’s fertilizer subsidy will more than double in the current fiscal as the government seeks to shield farmers from rising international prices, a top government official said on Tuesday.
Helping hand: Union minister Ram Vilas Paswan has said DAP imports are likely to be 6.5mt this year against 2.9mt last year. (Photo: Madhu Kapparath / Mint)
Shares of fertilizer firms Tata Chemicals Ltd, Rashtriya Chemicals and Fertilizers Ltd, National Fertilizers Ltd, Nagarjuna Fertilizers and Chemicals Ltd and Chambal Fetilisers and Chemicals Ltd rose 3-7% in response to the news.
Fertilizer secretaryJ.S. Sarma estimated the subsidy for the year to March 2009 to rise to Rs95,000 crore from Rs40,340 crore a year ago.
Fertilizer makers in India are subsidized to compensate for the shortfall in revenue due to government-mandated lower prices for certain fertilizers.
“There has been significant increase in international prices,” Sarma told reporters at a news conference.
Union chemicals and fertilizer minister Ram Vilas Paswan said urea prices have touched $600 (Rs25,740) a tonne in the international market, from $200 a tonne in the recent past.
Prices of diammonium phosphate (DAP) have surged to $1,270 a tonne from $207 a tonne, he said.
“Despite the rise in international prices, we have ensured adequate supplies of fertilizers in the country. DAP imports are likely at 6.5 million tonnes (mt) this year against 2.9mt last year,” Paswan said.
Paswan said his ministry was considering converting naphtha-based fertilizer units to use gas, as the petroleum ministry had promised sufficient gas supplies.
He said 30% of fertilizer units in India ran on the more expensive naphtha.
Sarma said the government is likely to finalize a new investment policy soon for the fertilizer sector to encourage new plants and expansion of the existing units.
“The policy may be ready in two-three weeks,” he said.
To attract investment in the sector, units envisaged under the new policy would get price parity with international rates, he said.
Earlier, Paswan had said the new pricing policy will be benchmarked with international prices. However, the price may be 5% less than international price when the costs of domestic fertilizers are calculated, he said.
“We are meeting today (Tuesday) to discuss the investment policy,” Sarma said, adding a committee was set up by the group of ministers (GoM) on fertilizer, headed by agriculture minister Sharad Pawar.
The GoM had, in February, proposed formation of a committee, led by Planning Commission member Abhijit Sen, to look into different options for formulating the new investment policy.
Sarma also said the annual policy for phosphorus and potash may be sent to the cabinet within the next three weeks. “We are expecting comments from the finance ministry in next couple of days. After that it will be placed before the cabinet.”
PTI contributed to this story.
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First Published: Tue, May 27 2008. 10 31 PM IST