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‘Can fertilizer price rules be tweaked’

M.K. Alagiri raised six queries on the so-called ‘nutrient-based subsidy’ mechanism under which the prices of fertilizers, including diammonium phosphate and muriate of potash, were freed in April 2010.   (M.K. Alagiri raised six queries on the so-called ‘nutrient-based subsidy’ mechanism under which the prices of fertilizers, including diammonium phosphate and muriate of potash, were freed in April 2010.  )Premium
M.K. Alagiri raised six queries on the so-called ‘nutrient-based subsidy’ mechanism under which the prices of fertilizers, including diammonium phosphate and muriate of potash, were freed in April 2010.
(M.K. Alagiri raised six queries on the so-called ‘nutrient-based subsidy’ mechanism under which the prices of fertilizers, including diammonium phosphate and muriate of potash, were freed in April 2010. )

Fertilizer minister M.K. Alagiri asks officials to look into the matter in light of ‘exorbitant hike’ in the prices

New Delhi: Fertilizer minister M.K. Alagiri has asked officials in his ministry to check whether the rules that govern the pricing of non-urea fertilizers can be tweaked to contain the “exorbitant hike" in the prices of the farm nutrients.

This is one of six queries raised by Alagiri on the so-called “nutrient-based subsidy" (NBS) mechanism under which the prices of fertilizers, including diammonium phosphate (DAP) and muriate of potash (MoP), were freed in April 2010.

Alagiri wants the answers to the questions raised in the 23 August internal ministry note, which Mint has reviewed, in a month. The note was addressed to fertilizer secretary Ajay Bhattacharya, who retires on 31 August.

He has also asked whether the price regime has any provisions under which the government can monitor “whether the subsidy given to the company has been passed on to the farmers or not" and if any change in the existing policy is required to achieve this.

The ministry typically subsidises companies that sell such fertilizers at lower than procurement cost. They are reimbursed by the government after the product has been sold to dealers.

The government is currently working on a mechanism to transfer the subsidy directly to farmers by linking the delivery of fertilizers to the Aadhaar number issued under the unique identity project.

DAP prices have risen to about 24,000-26,500 a tonne from about 9,000 in April 2010, when prices of non-urea fertilizers were freed, and MoP prices have increased to 17,000 per tonne from 4,500. The price of urea, the most dominant fertilizer, continues to be government controlled. In the past, Alagiri had opposed the deregulation of non-urea fertilizers, but was over-ruled by the cabinet, which freed prices. He has also opposed any move to free urea prices.

Significantly, Alagiri wants the department to figure out whether the change in the pattern of usage of such fertilizers after price deregulation “will lead to imbalanced fertilizer usage and consequential adverse impact on soil-crop nutrient uptake, further affecting the agricultural productivity".

Rising prices, coupled with availability issues, have meant that the consumption of MoP at least has dropped in the past one year, said Tarun Surana, an analyst with Mumbai-based Sunidhi Securities and Finance.

“Last year, high international prices ensured that, till September, there were no potash imports, so consumption declined," Surana said.

Alagiri’s latest note comes after at least three similar notes were sent by junior fertilizer minister Srikant Kumar Jena in July and August, in which he had raised several key issues related to the NBS price regime. Jena, in his letters, had also raised issues related to the sale and distribution of fertilizers and the rising prices of non-urea fertilizers in the country, Mint reported on 19 July, 2 August and 20 August.

On 30 July, a standing committee on fertilizers, headed by Bharatiya Janata Party parliamentarian Gopinath Munde, had questioned fertilizer ministry officials on the price rise.

Finally, Alagiri also wants to know from the department whether imports of such fertilizers should be regulated. India imports more than half its requirement of DAP and nearly the entire requirement for MoP either as finished product or in semi-finished form. There are currently no curbs on companies for importing these fertilizers.

Consumption growth of DAP and MoP was impacted in 2011-12 vis-à-vis 2010-11 and the impact is more in the current fiscal said K. Ravichandran, senior vice-president and co-head, corporate ratings at Icra. “Major reasons for the negative growth are the weak monsoons in the rabi season of FY12, further compounded by larger monsoon deficit in the ongoing Kharif season in major agricultural states. Moreover, there has been price resistance from the farmers due to more than doubling of farm gate prices," he said. “On the contrary, Urea prices have remained almost static during this period leading to large disparity in nutrient prices," he added.

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