Panel wants deregulation of fertiliser industry

The committee wants replacement of the existing unit-wise retention price scheme (RPS) by an alternate pricing methodology based on long range marginal cost (LRMC) principle. A normative referral price (NRP) is to be determined basing on LRMC method for computing subsidy to be given to the existing units for the sale of fertilisers within the notified ceiling of FGP.

Subsidy should be given through the manufacturers uniformly per tonne of fertilisers sold to the extent of the gap between NRP plus dealers margin and average freight and FGP. The NRP and subsidy should be suitably revisedperiodically.

The new pricing methodology should be extended also to phosphatic fertilisers. Similarly, low analysis fertilisers like single super phosphate (SSP), ammonium sulphate (AS), calcium ammonium nitrate (CAN) and ammonium chloride (AC) should also be priced on the basis of their nutrient content.

For the new units, the committee has recommended a guaranteed price over a period of 15 years to be announced by the government well in advance based on the long range marginal cost (LRMC) principles for projects based on most efficient feedstock.

The committee has recommended that the ex-factory NRP for urea be fixed at Rs 6,050 per tonne and for DAP at Rs 11,900 per tonne as on January 1, 1998 and at Rs 6,500 per tonne and Rs 12,800 per tonne respectively after including dealers margin and average freight. The feedstock differential cost reimbursement (FDCR) to the tune of Rs 1,750 per tonne and Rs 1,300 per tonne of urea sold as on January 1, 1998, be given to fertiliser units using naphtha or coaland FO/LSHS respectively for a period of five years.

The panel called for canalisation of urea imports for a period of five years. It also recommended setting up of a Fertiliser Policy Planning Board which would provide administrative mechanism for inter-sectoral policy coordination.

The distribution of fertilisers has also been recommended for deregulation from rabi 1998-99. The local taxes such as turnover taxes, purchase tax and additional sales tax should be over and above the maximum farm-gate price. The committee has also concluded that the new methodology required open distribution of fertilisers, implying thereby abolition of allocations under Essential Commodities Act, 1955 and withdrawal of the equated freight scheme.