Fertiliser needs gas on priority and at reasonable rates, more so non-urea fertiliser producers
The Modi government is doing everything within its executive power to ensure that ‘Make in India’ succeeds. However, there is one sector, fertilisers, which has not got the attention it deserves. Even after two-and-a-half decades of reforms, this industry not only remains highly regulated with intrusive controls on production, distribution, sales and pricing, it is also excessively micromanaged. Controls on selling price at levels unrelated to cost, and subsidy accounting for an overwhelming share of manufacturers’ realisation from sale have seriously hampered the sector’s ability to survive. No fresh investment has been made in this industry for close to two decades.
Discriminatory policy
Even as the finance minister talks about the government’s resolve to honour its commitments, in fertilisers, dishonouring commitments seems to be the order of the day. The department of fertilisers (DoF) has not implemented various Cabinet decisions such as allowing increase in ‘fixed cost’ to urea manufacturing units and reimbursement of marketing margins incurred by them. Phosphoric and potassic fertilisers have been denied domestic gas supplies despite a government directive to this effect.
Seeking legal recourse against the administrative ministry should be the last option and industry would exercise it only under extreme compulsions. However, the Fertiliser Association of India (FAI) has had to take to legal recourse on a number of issues. Even court verdicts are ignored.
The directive of the Delhi High Court on reimbursement of marketing margin to urea units went unheeded. The FAI was compelled to file a contempt petition.
In a surprise move, the ministry of petroleum and natural gas has recently issued a directive to GAIL to charge the highest re-liquefied natural gas rate from manufacturers of phosphatic and potassic fertiliser. This would render domestic gas-based complex fertiliser amongst the costliest globally, to the manufacturers’ detriment.
Surprisingly, gas supply to non-priority sectors such as steel and petroleum will continue at much lower prices. Just to get an idea, whereas the non-priority sector will get gas at under $4 per mmBtu (million British thermal units), domestic complex fertiliser manufacturers will have to pay around $15-20 per mmBtu.
So, discrimination in the allocation of gas is at two levels: between the fertiliser and other sectors, and between urea and non-urea fertiliser makers.
These policies will aggravate the growing imbalance in the NPK (nitrogen, phosphorus, potassium) usage. Even the Economic Survey 2014 expressed concern over this trend.
Corrective steps
The chairman of the standing committee of Parliament on chemicals and fertilisers, too, has expressed serious concern over excessive usage of N vis-à-vis P and K.
The apathy of ministries concerned leading to “masterly inaction” and lack of coordinated policy responses is disastrous for every stakeholder: the government, the industry and the farmer.
A deteriorating NPK ratio is adversely affecting agricultural productivity and, therefore, farmers’ income.
The government should:
• Implement its own policy pronouncements in letter and spirit
• Implement the High Court orders to reduce unnecessary litigation
• Introduce major reforms in urea policy to implement NBS
• Accord top priority in allocation of domestic gas to fertilisers, and, within the fertiliser sector, equal treatment for both urea and non-urea fertilisers
• Create a level playing field for domestic fertiliser players and instil confidence among investors
The ultimate objective should be to protect domestic investments, achieve self-sufficiency in agricultural production, and ensure food security. Is the PMO listening?
The writer is a policy analyst
(This article was published in the Business Line print edition dated February 11, 2016)
http://www.thehindubusinessline.com/todays-paper/tp-opinion/distorted-gas-allocation-to-fertiliser-sector/article8220324.ece