Direct benefit transfer [DBT] of fertilizer subsidy offers huge benefits viz., rational allocation of resources, reduction of imbalance in NPK use, prevention of pilferage/black-marketing and saving in subsidy. Even as Modi – government is committed to introduce DBT, it would do well to seriously consider following 12 commandments:- (i) It must be made abundantly clear to all stakeholders that the day DBT is introduced, the present system of routing subsidy through fertilizer manufacturers will go. The new pricing scheme [NPS] for urea under which they are paid subsidy will be dismantled. Likewise, the nutrient based scheme [NBS] under which manufacturers of P&K fertilizers are paid subsidy will have to go. (ii) All manufacturers of urea and P&K fertilizers will sell...
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Category: Fertilizers
Fertilizer Industry in India – on the brink
Emboldened by the success of direct benefit transfer [DBT] in LPG and having announced DBT for kerosene subsidy in 26 districts to begin with from April 1, 2016, the government is currently examining various possibilities for taking similar initiatives in fertilizers [besides food]. Subsidy syndrome While, these efforts are welcome, it needs to take stock of the present state of fertilizer industry in India as its health is a pre-requisite for ensuring un-interrupted supply of fertilizers to farmers at affordable price. In a pre-budget meeting with finance minister, Arun Jaitely, the Fertiliser Association of India [FAI] told him that at present, manufacturers have outstanding subsidy dues of Rs 45,000 crores. It urged the government to clear these in three installments....
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It’s wrong to deny gas to the fertiliser sector
And worse still, to favour urea producers over decontrolled fertiliser units in gas allocation, exacerbating the nutrient imbalance The manner in which gas is allocated within the fertiliser sector smacks of arbitrariness. The Centre gives a uniform subsidy to all manufacturers, including those of decontrolled complex fertilisers, under the Nutrient Based Scheme (NBS) . Why, then, does it use a different yardstick for allocation of gas to manufacturers of urea on the one hand and decontrolled fertiliser on the other? A two-judge bench of the Delhi High Court has ordered the government to resume supply of natural gas to Deepak Fertiliser and Petrochemicals Corporation (DFPCL), a manufacturer of decontrolled phosphatic fertilisers, which was arbitrarily suspended last year. The bench has...
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The unabated food and fertiliser worries
With reforms in fertilisers and food stuck in a groove, it is but natural that the government is shirking from paying subsidy arrears Hamstrung by its inability to achieve target for divestment proceeds from public sector undertakings (PSUs) and lower-than-expected collection from direct tax revenues, the government has resorted to hard posturing with regard to release of subsidy payments under major heads—fertilisers and food. As far as fertilisers are concerned, against a budget allocation of R73,000 crore for the current year, the requirement is expected to be around R80,000 crore. Even as the ministry of finance is likely to provide for additional R7,000 crore, it is in no mood to release arrears of about R30,000 crore from previous year. The...
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Fertilizer and food subsidy haunt budget – sans reform
Hamstrung by its inability to achieve target for divestment proceeds from public sector undertakings [PSUs] and lower than expected collection from direct tax revenue, government has resorted to hard posturing in regard to release of subsidy payments under major heads viz., fertilizers and food. In regard to fertilizers, against budget allocation of Rs 73,000 crores for current year, requirement is expected to be around Rs 80,000 crores. Even as ministry of finance [MOF] is likely to provide for additional Rs 7000 crores, it is in no mood to release arrears of about Rs 30,000 crores from previous year. MOF has also rejected a request from department of fertilizers [DOF] for a special banking arrangement [SBA] for short-term loan of Rs...
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Gas price loss is urea’s gain
It’s time to leverage the conditions. Freeing distribution and movement will also make a difference Under new pricing guidelines notified in October, 2014, the price of domestic gas was fixed at $5.61 per mBtu on net calorific value (NCV) basis with effect from November 1, 2014 — an increase of 33 per cent over the $4.2 per mBtu prior to that date. The price was applicable till March 31, 2015. The price was arrived at by taking a weighted average of gas prices in Henry Hub (the US), NBP (National Balancing Point, the UK), AGR (Alberta Gas Reference, Canada) and Russia. It was to be revised once in six months based on movement in these indices for a full year,...
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Domestic gas price cut – can help end urea mess
Under new pricing guidelines notified in October, 2014, the price of all domestic gas was fixed at US$ 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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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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