Fertilizer ministry may be questioned on price rise

Fertilizer ministry may be questioned on price rise

New Delhi: “In the past, the committee has only questioned the ministry on fertilizer availability, but never on prices, ever since non-urea fertilizer prices were decontrolled (in 2010)," said a ministry official. “This move indicates that there is considerable political pressure to contain the price rise."

With deficient rain in the June-September monsoon, the rise in input costs will add to the pressure on food supplies and therefore inflation in a year during which economic growth looks like it will continue to slow.

A top ministry official said that it was “too early" to say whether the panel would issue any directive to contain prices. “As of now there is no official move to go back on deregulation."

On average, non-urea fertilizers contribute as much as 10% to total input costs across agricultural commodities, said Sudhir Panwar, a professor at the University of Lucknow and an expert on farm issues. “This year, due to a drought-like situation, we can expect demand for non-urea fertilizers to go down by 20-25%," he said.

The standing committee on fertilizers is headed by Lok Sabha member Gopinath Munde, who belongs to the main opposition Bharatiya Janata Party.

“We will primarily discuss three issues -- the three-fold price rise, availability of fertilizers and direct transfer of subsidy to farmers," said Munde. “Price rise is a serious issue, which can ultimately lead to a reduction in the supply of food production in the country. Moreover, the government had promised direct transfer of subsidy to farmers, which has not yet happened."

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A Parliamentary standing committee will question fertilizer ministry officials about a near tripling in the prices of non-urea fertilizers in the last two years. Aman Malik tells us more.

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Besides the rise in prices, the ministry is also likely to be questioned on the issue of the rising fertilizer subsidy, both on account of urea, the most dominant fertilizer, and non-urea fertilizers.

The retail prices of non-urea fertilizers such as di-ammonium phosphate (DAP) and muriate of potash (MoP) were freed in April 2010, but the government continues to subsidize them. Other minor non-urea fertilizers include single super phosphate and various grades of so called ‘complex’ fertilizers, whose prices have also gone up appreciably.

While DAP prices have risen to about 24,000 a tonne from about 9,000 in April 2010, MoP prices have increased to 17,000 per tonne from 4,500.

According to the government’s budget figures, it spent 67,198.94 crore on the fertilizer subsidy in 2011-12, compared with 62,301.21 crore in 2010-11.

To be sure, these figures do not reflect the 20,000-25,000 crore that the government typically carries over each year to the following year’s budget. The government routinely issues bonds to fertilizer companies in lieu of these unpaid subsidies.

Almost the entire demand for non-urea fertilizers is met via imports, either in intermediate or finished form. The domestic demand for DAP is 11-12 million tonnes (mt) a year, the second highest after urea. While 6-6.5 mt of DAP is imported, the rest is produced locally. The demand for MoP stands at 5-6 mt.

The retail price of urea, the most dominant fertilizer, continues to be regulated.

The ministry, in its defence, is likely to attribute the steep price rise in prices to two main factors -- hardening prices of potassic and phosphatic minerals in the international market and the recent depreciation of the rupee against the dollar and the euro.

The standing committee meeting comes amid growing political opposition to the derugulated price regime. Such opposition is coming not only from states ruled by parties opposed to the Congress party-led United Progressive Alliance (UPA) but also from within the fertilizer ministry itself.

Officials said that chief ministers of several states, including Madhya Pradesh, Karnataka and Tamil Nadu, have written to Prime Minister Manmohan Singh demanding that price controls be re-imposed on non-urea fertilizers.

On 19 July, Mint first reported that junior fertilizer minister Srikant Kumar Jena had asked the ministry to make it mandatory for companies selling non-urea fertilizers to certify that they were passing on state subsidy benefits to farmers.

In an 18 July note to Bhattacharya, Jena had asked the ministry to ensure that the “decontrol in retail prices does not imply that the companies are at their free will to gain undue profits."

aman.m@livemint.com

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