If the Government is serious about making a dent on subsidy, it should dismantle controls and give subsidy directly to target beneficiaries (the poor) under direct benefit transfer. This will pave the way for many players, increase supply, offer more choices and foster competition In the Medium Term Expenditure Framework (MTEF) statement (a statutory requirement under the Fiscal Responsibility and Budget Management Act, 2003) presented by the Modi Government, expenditure on fertiliser subsidy during 2018-19 and 2019-20 was kept unchanged at Rs 70,000 crore. The provision was the same in this year’s budget. Allocation for food subsidy has been increased from Rs 145,000 crore during 2017-18 to Rs 175,000 crore during 2018-19 and further to Rs 200,000 crore in 2019-20....
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Category: Urea Investment Policy (UIP)
Fertilizers and food – reforms put in deep freezer
In the medium-term expenditure framework statement [MTEFS] – a statutory requirement under the Fiscal Responsibility and Budget Management Act [FRBM] [2003] – presented by Modi –government, the spend on fertilizer subsidy during 2018-19 and 2019-20 has been kept unchanged at Rs 70,000 crores being the provision in the budget for current year 2017-18. The allocation for food subsidy has been increased from Rs 145,000 crores during 2017-18 to Rs 175,000 crores during 2018-19 and further to Rs 200,000 crores in 2019-20. These numbers are completely out of sync and in contradiction with the government’s commitment to ‘rationalize’ and ‘target’ both fertilizer and food subsidy [i.e. give these to the poor/deserving only] – made in successive budgets as well as the...
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Self-sufficiency in fertilizers – a pipedream
For nearly 4 decades, successive governments have vowed to achieve self-sufficiency in production of fertilizers yet, this much trumpeted goal has eluded them barring a brief stint in early 90s. Will things be different under Modi – dispensation? Immediately after the present government took charge in May, 2014, fertilizer minister, Ananth Kumar reiterated the dire need for achieving self-sufficiency in fertilizers by re-invigorating sick plants of Fertilizer Corporation of India (FCIL) and Brahmaputra Valley Fertilizer Corporation of India (BVFCL) (earlier known as HFCL) both undertakings of central government. Both these undertakings have been incurring losses for several years in fact decades. Indeed, some plants under them viz., Ramagundum and Talcher (FCIL) and Haldia (BVFCL) were babies born sick. It would...
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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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Urea investment policy – a dream shattered
In January 2013, government had notified a urea investment policy (UIP) for new green field projects; expansion of existing units; additional urea from revamp of existing units and revival projects of sick public sector units of Fertilizer Corporation of India (FCIL) & Hindustan Fertilizer Corporation (HFCL). Early this year, it made two amendments in UIP. The first amendment dispensed with the “dispensation of guaranteed buy-back ” outlined earlier. A second amendment requires interested private companies to give a bank guarantee (BG) of Rs 300 crore for every project, while PSUs firms are exempted from it. (In view of general elections and model code of conduct coming in to force, its notification was kept in abeyance. The amended policy has now...
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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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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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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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