Soil remedies Fertiliser reforms are good for farmers P RAJU By taking tough decisions now on MRP and subsidies, the Government will ensure better times to follow September 10, 2014: The Prime Minister unveiled a five-point agenda for ushering in a technology-led second green revolution in India. One of these is the issuing of a soil health card (SHC) to every farmer, with recommendations for fertiliser use. But will this help address the persisting imbalance in fertiliser use? Though the Economic Survey recognised the seriousness of the problem, the Budget was silent on any policy steps to address it. To get maximum crop yield from fertiliser use and maintain soil health, a farmer needs to apply all three major nutrients,...
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Category: Pricing policies & subsidies
Time to say ‘good bye’ to subsidies
One of the planks on which Modi got mandate to govern was his promise to deliver on fiscal consolidation. In its maiden budget for 2014-15, government has pledged to achieve this by pruning subsidies and higher tax revenue based on lower rates. Recently, prime minister approved constitution of an expenditure management commission (EMC) under chairmanship of Dr Bimal Jalan former governor RBI to recommend a road-map up for rationalizing and phasing out major subsidies viz., food, fertilizers and oil. The commission has been asked to submit its report within 18 months. However, it will submit an interim report in 6 months. The protracted time frame for the committee should not be taken to mean any dilution of government’s commitment on this crucial reform....
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Food, fertilizers and fuel – need ‘overhaul’, not just re-routing of subsidy
In its maiden budget presented on July 10, 2014, NDA-government has announced setting up of an expenditure reforms commission (ERC) that will examine all subsidies viz., food, fuel, fertilizers and come up with a road map for restructuring them. Further castigating existing dispensation as one that does not target beneficiaries (read poor) and leads to ever rising ‘un-quantifiable’ subsidies, it has promised to switch over to a scheme of direct cash transfer (DCT) to poor in a focused and transparent manner. Since then, it is close to a month and ERC has not been constituted as yet. At this pace, we can’t expect its recommendations before end of current year. Therefore, any major restructuring may have to wait at least...
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Prune subsidies vide censoring producers
Contrary to expectation, there was no big bang reform in regard to subsidies in Modi-government’s maiden budget presented on July 10, 2014. However, Arun Jaitley announced setting up of an expenditure reforms commission (ERC). While, we may have to wait for ERC recommendations until next budget in February, 2015, meanwhile Jaitley has given some ideas on direction in which government intends to move forward. Thus, he opines that extant dispensation of subsidies which he describes as ‘un-quantifiable’ and beneficiaries ‘un-identifiable’ cannot be allowed to continue. He emphasized need for replacing this by a system of direct subsidy transfer to poor. To countenance menace of subsidies, Jaitely alluded to fundamental need for consumers/users to pay for increase in cost of goods...
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Fertilizer reforms – deliver bitter pill for ‘achchhe din’
While, replying to debate on President’s address, the prime minister unveiled a 5 points agenda for ushering in a technology-led second green revolution in India. One of these is issue of soil health card (SHC) to every farmer to apprise about status of his soil. SHC will mention inter alia recommendations for fertilizer use taking in to account nutrient status of soil and crop type. The information will be computerized and each farmer given a unique identification number (UIN) to download the card for his farm. If the mission can be achieved within 5 years term of this government and farmers start following recommendations as per their respective cards, it will revolutionize the way Indian agriculture is practised. However, mere...
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Fertilizer Industry in India – Challenges and Way-forward
Fertilizers – key to food security and sustainable agriculture Food security is of paramount importance to meet the growing food needs of an ever increasing population. Not having sufficient domestic production of food to meet requirement of 1.25 billion plus and still expanding will not only put a huge burden on scarce foreign exchange resources but can also expose us to exploitation in global market. Hence, there can be no compromise on this overriding goal. Agriculture has a share of around 15% in gross domestic product (GDP) and nearly 60% of population derives its livelihood from it. Industry and services sectors too depend heavily on it for their rapid and sustained growth. Therefore, agriculture needs to grow rapidly not only...
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RIL/BP/Niko exploit ‘fault line’ in Rangarajan formula – for a bonanza
On January 10, 2014, Government had notified new guidelines for pricing of domestic gas applicable from April 1, 2014 that would lead to doubling from current US$ 4.2 per mBtu. Even as EC has deferred its implementation for now, meanwhile, fertilizer industry has got another shocker. In the gas sales purchase agreement (GSPA) for supplies from D-6 block of Krishna-Godavari (KG-D6) basin, Reliance Industries (RIL) has proposed that government fixed rate will be charged on gross calorific value (GCV) basis instead of current practice of charging on net calorific value (NCV). It also moots marketing margin of US$ 0.135 per mBtu on GCV basis. For arriving at price applicable to all domestic gas, Rangarajan formula takes average of hub prices...
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Urea investment policy – a flop show, yet again
The Cabinet has recently approved an ‘amended’ new urea investment policy (UIP) which was notified in January 2013. The amendment drops the provision of guaranteed buy-back of urea from projects covered by it. Key features of the policy are in order. It assures investors in green-field and revival projects of sick public sector units of FCI & HFC a price linked to import parity price (IPP) with a floor (F) US$ 305 per ton and ceiling (C) US$ 335 per ton. This corresponds to gas price of up to US$ 6.5 per mbtu. For increase in gas price beyond this level, it provides for suitable adjustment in ‘F’ and ‘C’. Thus, for each $ increase up to US$14 per mbtu,...
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Enough of this urea populism
A urea price hike is in order to curb subsidy outgo and redress nutrient imbalance A Group of Ministers (GoM) was set up last year to suggest a suitable hike in urea price to neutralise increase in energy cost, so that subsidy can be reined in. The Government, however, has categorically ruled out any increase until general elections. The maximum selling price (or MRP) of urea has been under control since 1957. Until the late 70s — a period of low inflation and low feedstock price — the MRP was higher than the cost of production and distribution. Hence, there was no subsidy. Since 1977, equation was reversed, with cost exceeding selling price. The Government had to give subsidy to...
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Price controls and fiscal cliffs
The department of fertilisers (DoF) is working on an arrangement with a consortium of PSBs for a loan amounting to R25,000 crore to pay outstanding fertiliser subsidy dues to the manufacturers. Urea manufacturers receive subsidy under the new pricing scheme (NPS) to cover the differential between the cost of production and distribution, and maximum retail price controlled at a low level. DAP and complex fertiliser manufacturers receive subsidies under the nutrient-based scheme (NBS)—a ‘fixed’ amount linked to nutrient content, viz nitrogen, phosphate and potash. The budget for 2012-13 provided for an allocation of around R60,000 crore towards fertiliser subsidies. These funds were exhausted in the first 4 months of the current fiscal. DoF needs an additional Rs 40,000 crore to...
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