Addressing the 9th Global Agriculture Leadership Summit on September 8, 2016, chemicals and fertiliser minister, Ananth Kumar proclaimed that neem-coating of all urea supplies meant for use by farmers has resulted in elimination of diversion to chemical industries and smuggling to neighbouring countries. If, the claim is true, it will have a profound impact on the larger picture of demand-supply balance, self-sufficiency in fertilisers, dependence on import, subsidy pay-out, demand for hydrocarbons especially gas and impact on the environment. The total consumption of urea is about 30 million tonnes annually, including 22 million tonnes indigenous and 8 million tonnes of imported product. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price, excess of cost of production/import...
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Category: Pricing policies & subsidies
Gains from neem coating urea – real or imaginary!
The exhortations by prime minister, Modi and his cabinet colleague, chemicals and fertilizer minister, Ananth Kumar regarding the success of neam coating of urea [ordered by Modi last year to cover all of domestic production and import] could have much deeper ramifications than mere stoppage of diversion to industrial use and smuggling to neighboring countries. The total consumption of urea in India is about 30 million tons annually including 22 million ton indigenous and 8 million tons imported. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price under the Fertilizer Control Order [FCO], the excess of cost of production/import and distribution over this price is reimbursed to them as subsidy by Government of India [GOI]. For...
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MAKING DBT FERTILISER A REALITY
Considering the perceptible impact of DBT for fertiliser subsidies on stakeholders, it is imperative that the Government comes out with a roadmap so that the beneficiaries get adequate time to prepare for the transition Speaking at the inaugural session of the ninth Global Agriculture Leadership Summit on September 8, in New Delhi, Union Minister for Chemicals and Fertilisers, Ananth Kumar said that the Government was committed to implement direct benefit transfer (DBT) for fertiliser subsidy to farmers. But he failed to give a time-frame. Drawing a parallel with liquefied petroleum gas where DBT has already been successfully implemented, he opined that things are much more complex in the fertiliser case. He said the Government would take a call on this...
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DBT for fertilizers – where is the ‘road-map’?
Inaugurating the 9th Global Agriculture Leadership Summit on September 8, 2016 in New Delhi, the union minister for chemicals and fertilizers, Ananth Kumar said that the government is committed to implement direct benefit transfer [DBT] of subsidy on fertilizers but avoided giving a time frame. Drawing a parallel with LPG [liquefied petroleum gas] where DBT has already been successfully implemented, he opined that things are much more complex here and the government will take a call on this only after successful conduct of trial runs which are currently under way in certain districts of the country. All that is fine but every stakeholder viz., farmer, manufacturer, importer, distributor/dealer etc has a right to know as to how he/she will be...
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Tata exit from fertilizers – symptomatic of deeper malaise
Tata Chemicals Limited [TCL] made headlines on August 10, 2016 by announcing sale of its urea business [it has a plant in Babrala, Uttar Pradesh with 700,000 tons ammonia and 1.2 million ton urea capacity] to Yara Fertilizers India Private Limited [YFIL] – Indian arm of Norway’s Yara lnternational ASA – for a sum of Rs 2670 crores [after obtaining all regulatory approvals and court sanction, the transaction will be consummated within 9-12 months]. TCL had decided to exit fertilizers long back. However, a number of earlier attempts had failed as it did not find any taker; even this one is a distress sale and will fetch the company only 2/3rd of the money so far invested. Tata has also...
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GST will boomerang on fertilisers
Even if the lower end of 12% is applied to fertilisers, it would be double the existing duty Given the critical role of fertilisers in ensuring food security, for decades, the government has followed a policy of controlling their prices at low level—unrelated to cost of supply—and reimbursing the excess as a subsidy to the manufacturers. The Goods and Services Tax is being billed as transformative reform that has the potential to drastically reduce transaction costs — owing to elimination of cascading effect of tax-on-tax and withdrawal of a host of local levies— and substantially increase efficiency across the supply chain as interface with multiple authorities over a number of geographical locations gets eliminated. For the fertiliser industry, however, the...
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Minus gas – GST will boomerang on fertilizers
The passage of the 122nd constitution amendment bill [already cleared by Lok Sabha last year] by Rajya Sabha [RS] on August 3, 2016 paves the way for introduction of the Goods and Services Tax [GST]. This is a ‘trans-formative’ reform that will convert the Indian Union of 29 states in to a seamless national market enabling free movement of goods and services as a single ‘uniform’ tax replaces a plethora of existing taxes – at the central and state level. A single uniform tax regime applicable across all states and union territories will drastically reduce transaction cost [due to elimination of cascading effect of tax-on-tax and withdrawal of a host of local levies] and result in substantial increase in efficiency...
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Fertilizer woes – quick fix won’t work
On July 4, 2016, the minister for chemicals and fertilizers, Ananth Kumar announced government’s decision to reduce maximum retail price [MRP] of non-urea fertilizers viz., DAP [di-ammonium phosphate: 18% nitrogen [N] & 46% phosphate [P]]; MOP [muriate of potash] [60% potash [K]] and complex fertilizers [contain N, P and K in different proportions] with immediate effect. The retail price of DAP has been reduced by Rs 2,500 per ton to Rs 22,000/tonne, MOP by Rs 5,000 per ton to Rs 11,000/tonne and those of complex fertilizers by Rs 1,000/tonne on an average. The minister went on to say that the rate cut would entail a benefit of Rs 4,500 crore to farmers and help promote balanced use of fertilizers. On...
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‘Make in India’ skips fertilizers
Even as Modi – government has unleashed a wave of reforms to accelerate the pace of foreign direct investment [FDI] and give a boost to prime minister’s flagship “Make in India”, fertilizers happens to be one sector that has been completely bypassed. While, indigenous production in all segments of this crucial industry continues to languish, the most neglected is DAP [di-ammonium phosphate; it contains 18% nitrogen [N] and 46% phosphate [P]] where traders have hey-day at the expense of domestic industry. Of the total DAP consumption in India, nearly 60% is met from imports. India is the single biggest buyer of DAP in global market with a share of more than 50 per cent of globally-traded DAP. Even for domestically-manufactured...
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Revival of sick fertilizer PSUs – a mirage
The revival of sick plants of two central public sector undertakings [PSUs] viz., Fertilizer Corporation of India Limited [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] is once again in the news. Last year, the Union Cabinet had approved a plan to revive the Barauni [Bihar] of [HFCL], Gorakhpur [UP] and Sindri [Jharkhand] of FCIL through auctions. Having failed to get a good response through this route, the central government had asked cash-rich PSUs viz., Oil and Natural Gas Corporation Limited [ONGC], National Thermal Power Corporation limited [NTPC] and Coal India Limited [CIL] to adopt one closed urea plant each for revival. Accordingly, CIL and NTPC have signed an agreement to form a joint venture [JV] to revive Sindri and Gorakhpur...
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