The Hindu Business Line : Fertiliser subsidy

Who benefits from subsidy? Currently, the cost of imported urea is above $225/tonne cfr, which translates to over Rs 12,300/tonne at the farmgate against the weighted average domestic cost at Rs 9185/te. When import is expensive compared to indigenous urea, we fail to understandhow the author concludes that the Group Concession Scheme (GCS) accommodates inefficiencies of manufacturing units and fertiliser subsidy goes to manufacturers. In order to make urea available to farmers (80 per cent being small and marginal) at affordable prices, the Government has kept MRP lower than its cost, and the subsidy, therefore, is to the farmers and not to the manufacturers.

The understanding ofthe author that Expenditure Reforms Commission recommendations were diluted in GCS in favour of industry is incorrect.

Further, it is stated that "During the 1990s, the prices of naphtha, fuel oil and LSHS rose steeply. The fertiliser producers offered no resistance... ." This ignores the fact that during the 1990s, the prices of these products were controlled by the government.

Similarly, the author admits that higher subsidy this fiscal is due to steep increase in prices of raw materials but in the same breath concludes that such payments will only benefit fertiliser producers! Stating that the cost-plus syndrome will spread to all areas of cost also reflects the author choosing to ignore the New Pricing Scheme (applicable till 2006) under which no such cost-plus reimbursement is allowed.

The industry has urged the Government, time and again, that subsidy to farmers be paid to them directly and not channelled through manufacturers. Industry does not benefit from subsidy and fertilisers be allowed to be sold at market determined prices.

A.C. Dubey

Chief Economist,

The Fertiliser Association

of India,

New Delhi

Letters to the editor and contributions can be sent by bleditor@thehindu.co.in

A.C. Dubey

Chief Economist,

The Fertiliser Association

of India,

New Delhi