Under new pricing guidelines notified in October, 2014, the price of all domestic gas was fixed at US$ 5.61 per mBtu [million British thermal units] on net calorific value [NCV] basis w.e.f November 1, 2014 which was an increase of 33% over US$ 4.2 per mBtu prior to that date. The price was applicable till March 31, 2015. The price was arrived at by taking a weighted average of gas prices in Henry Hub [USA], NBP [National Balancing Point] [UK], AGR [Alberta Gas Reference] [Canada] and Russia. It was to be revised once in 6 months based on movement in these indices for a full year three months prior to the date of next revision. Thus, for price effective from...
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Category: Alternative policy scenario
Root cause of inaction in fertiliser reforms
Unless the government accepts a higher MRP for urea, nutrient imbalance cannot be addressed Four major pronouncements on fertiliser reforms need close scrutiny. First, the Prime Minister promised that every farmer would have a soil health card (SHC) to know how much nutrient is needed for a good yield and to keep the soil healthy. What if the results of the soil analysis encapsulated on the SHC require application of more phosphate (P) and potash (K) but the fertilisers carrying these nutrients, other complex fertilisers and so on are too expensive? The pricing consideration Currently, the MRP of dia-ammonium phosphate (DAP, the primary source of P) is four times the price of urea (the main source of nitrogen), whereas muriate...
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Plummeting gas price – golden opportunity for urea decontrol
Until last year, ballooning subsidy on fertilizers and its inevitable effect on fiscal deficit was haunting the government. The prime cause for this was control on selling price of urea on one hand increase in prices of feedstock and fuel on the other. The latter in turn was due to increase in international price of crude oil and imported LNG [liquefied natural gas]. During the current year, the scenario has turned for the better. Thanks to a constellation of forces leading to emergence of excess global supply, the international price of crude has plummeted from a high of around US$ 105 per barrel in June 2014 to below US$ 50 per barrel currently. And, there is nothing stopping the downward movement....
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Fertilizer reforms – time to walk the talk
Successive governments have blatantly glossed over reforms in the fertilizer sector for generations. Modi who was catapulted to power on the promise of pushing reforms and development had generated hope. Yet, during last 15 months in office, one only hears loud talk but no action on ground. In this regard, four major pronouncements of Modi – dispensation need close scrutiny. First, the prime minister promised that every farmer has a soil health card [SHC] so that he knows how much nutrient he will need to apply for getting good crop yield and keep soil healthy and robust. This by itself is a herculean task requiring cooperation of all state governments and authorities right up to the village level to ensure...
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Uniform fertilizer subsidy policy must for DBT
The subsidy regime, covering both subsidy rates and payment terms, for P&K fertilisers should be brought in sync with urea The discriminatory policy treatment impairs the ability of industry to supply P&K fertilisers to farmers at affordable prices, which will aggravate imbalance in fertiliser use. This makes a mockery of Prime Minister Narendra Modi’s vision behind giving farmers a Soil Health Card so that they apply fertilisers as per soil needs. On May 13, the government released press notes on the approval of the comprehensive New Urea Policy 2015 and the nutrient-based subsidy rates for phosphate and potash fertilisers for FY16. A key announcement was: “Movement plan for P&K fertilisers has also been freed to reduce monopoly of a few...
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Go for course correction in urea pricing
The real reason for diversion of urea to industrial use, smuggling, black marketing and its excessive use is its ridiculously low selling price. On May 13, the government approved the Comprehensive New Urea Policy, which seeks to promote energy-efficiency, maximise indigenous urea production, and reduce subsidy burden on the budget. At present, under the New Pricing Scheme (NPS), in use since 2003, each of the 30 urea manufacturing units gets a retention price (or ex-factory price) based on the production cost specific to it. Since all of them are required to sell urea at ‘uniform’ controlled price which is lower, the difference is reimbursed as subsidy. NPS was designed as a group-based uniform pricing scheme, whereby each unit in a...
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HIGH COST OF POPULIST UREA POLICY
By keeping urea fertiliser prices artificially low, while non-urea fertilisers have been de-controlled, the Modi regime is encouraging an unhealthy dependence on this product, ignoring its smuggling and pilferage, and allowing the subsidy bill to increase The Union Government’s decision to freeze the maximum retail price of urea for four years is bewildering. The decision was taken on May 13 at a Union Cabinet meeting chaired by Prime Minister Narendra Modi. During the past one-and-a-half decade or so, the MRP of urea, which has been under statutory control for close to six decades now, was not touched at all — except once in 2010, when it was increased by a meagre 10 per cent. This was despite the fact that...
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DE-CONTROLLING UREA PRODUCTION
Removing the archaic ceiling on urea prices, which is a political sop to secure votebanks, will energise domestic production. This, in turn, will ensure consistent supply and also lessen the public’s subsidy burden India was able to import only about 9,00,000 tonnes of urea between April and November, 2014, which was 16 per cent less than what was imported during the same period in 2013. This put tremendous pressure on local markets. The problem was aggravated by a drop in supply from the Oman India Fertiliser Company SAOG. At home, three naphtha-fed urea production plants viz, Madras Fertilisers Limited, Mangalore Chemicals and Fertilisers, and Southern Petrochemicals Industries Corporation, also had to stop production after the Government decided to suspend subsidy payments....
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What is holding back direct fertiliser subsidy transfer?
SUMMARY Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector in India. Successive governments have talked about it and yet none has ventured to implement this. What has held them back? The idea was first mooted nearly four decades ago when, in March 1976, faced with increasing prices of complex phosphate fertilisers—then, there were no controls and manufacturers were free to fix price—the government introduced a flat subsidy at the rate of R1,250 per tonne phosphate nutrient (P2O5). The initial plan was to give the money directly to farmers so that the effective price (net...
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We need a coherent urea investment policy
A burden: And nobody will gain from it – A MURALITHARAN The urea industry is in need of wholesome nourishment rather than the piecemeal changes the Centre has been offering October 26, 2014: In January 2013, the Government had notified a urea investment policy (UIP) for new greenfield projects; expansion of existing units; additional urea from revamp of existing units and revival of projects of sick public sector units of the Fertilizer Corporation of India (FCIL) and Hindustan Fertilizer Corporation (HFCL). Early this year, it made two amendments in the UIP. The first dispensed with the “dispensation of guaranteed buy-back”, while the second requires interested private companies to give a bank guarantee of ₹300 crore for every project, while PSUs...
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