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Tuesday, Jun 22, 2004

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PMO mulls raising fertiliser subsidy

Ambarish Mukherjee

New Delhi , June 21

THE Prime Ministers' Office (PMO) is examining the possibility of increasing the fertiliser subsidy bill for 2004-05 in consultation with the Ministry of Finance (MoF) and the Department of Fertilisers (DoF), official sources told Business Line.

In a meeting held at the PMO last week headed by the Minister of State in the PMO, Mr Prithviraj Chawhan, and attended by officials from the MoF and DoF, the issue was discussed in detail but no decision was taken.

However, the Government is unlikely to increase allocation on this account immediately and will wait and watch.

"The Government already has some Rs 12,000 crore - Rs 13,000 crore fund for the subsidy. So, the increases could be made in the supplementary Budget if necessary," sources said.

The PMO's intervention follows a letter from the Minister for Fertilisers, Chemicals and Steel, Mr Ram Vilas Paswan, to the Prime Minister, Mr Manmohan Singh, seeking his intervention in two import deals between domestic fertiliser manufacturers and their foreign suppliers.

The first deal is for sourcing phosphoric acid used for manufacturing di-ammonium phosphate (DAP) and the second deal is for sourcing muriate of potash (MoP).

The domestic DAP manufacturers, official sources said, have entered into an arrangement with global phosphoric acid suppliers for sourcing the commodity at $402 per tonne. As there are differences in the duty structure of various countries, the effective rate comes to $398. However, even at $398 per tonne, the subsidy will work out to Rs 3,850 crore compared to Rs 3,200 crore last year when phosphoric acid was sourced at $356, officials said.

The MoP deal refers to Indian Potash Ltd (IPL). The company is planning to buy MoP from the international market at $180 per tonne compared to last year's price of $124 per tonne, based on which, the subsidy reimbursement is calculated. If the PMO finds the circumstances in which the deal was struck reasonable, then the reimbursements will be at the level at which IPL entered the deal from July 1, 2004, officials said.

Both these deals would have a severe impact on the exchequer to the extent of more than Rs 1,000 crore in net terms. This is why Mr Paswan is believed to have transferred them to the PM. Also, according to estimates, the total fertiliser bill for 2004-05 has been pegged at a whopping Rs 18,966 crore, which is Rs 7,119 crore more than the subsidy of Rs 11,847 crore in 2003-04 and Rs 6,304 crore more than the budget estimate of Rs 12,662 crore for the current year.

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