Fertiliser industry wants direct transfer of subsidy to farmers
New Delhi, (Source: The Hindu Business Line), January 25 — Reiterating its demand for total decontrol, the fertiliser industry has renewed its pitch for direct transfer of subsidy by the Government to farmers.
“The industry has no vested interest in subsidy. In fact, we have been requesting the Government to relieve the industry from this responsibility for the past few years,” said R.G. Rajan, Chairman, Fertiliser Association of India (FAI).
Rajan was responding to allegations of ‘misuse of subsidy’ and ‘windfall gains’ by fertiliser makers in a section of media. Dismissing the allegations, Satish Chander, Director-General, FAI, said the fertiliser makers operated on very thin operating margins, when compared to any other solid bulk commodity such as steel or cement.
To substantiate, Chander said the industry had clocked a net profit of mere Rs 2,500 crore on a turnover of Rs 117,000 crore in 2011-12. The turnover excluded the subsidy component on imported urea.
Fertiliser makers earned profit of a mere Rs 110 for each tonne of imported di-ammonium phosphate, while the profits are a mere Rs 94 a tonne on muriate of potash during 2012-13, he added.
Each tonne of imported DAP was priced at an average of $580 a tonne, while MOP was $490 . For the fertiliser maker, the total delivered cost for a tonne of DAP worked out to Rs 38,240, while it stood at Rs 31,106 a tonne for MOP, including charges such as handling costs, freight and insurance among others.
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Against this, the subsidy offered by the Government for DAP stood at Rs 14,350/tonne, thereby resulting in an effective price of Rs 24,000 for the farmers. Similarly, the subsidy offered by the Government for MOP stood at Rs 14,400, resulting in a price of Rs 16,800 for the farmers. “These figures clearly establish that there are hardly any margins for the industry,” Chandra said.
He further said the fertiliser subsidy for the year-ending March 31 is likely to overshoot the budgetary estimate by at least Rs 40,000 crore to cross Rs 1 lakh crore. The Government had made a provision of Rs 61,000 crore for fertiliser subsidy in the Union Budget 2012-13.
He further said that fertiliser companies had not been paid the subsidy for the last eight months.