The Hindu Business Line : Fertiliser body wants de-regulation of urea distribution

THE Fertiliser Association India (FAI) wants complete de-regulation of urea distribution in the country as envisaged in the New Pricing Scheme that is being implemented from April 1, 2003.

Even after de-regulation, FAI favours the Government to continue its current policy of reimbursement of equated freight charges, as non-payment of these charges could seriously affect the availability of urea in remote areas, particularly in States where urea plants are not located.

Following the introduction of the scheme, the Government reduced the payment of equated freight charges on decontrolled portion of urea by Rs 100 per tonne. FAI, however, says this is not justified as "there has not been significant change in distribution pattern."

The draft status paper of FAI on urea policy states that a price decontrol of the urea industry can be complete only when the manufacturers are free to sell urea to farmers at market determined prices.

"As long as the Government determines the maximum retail price of urea, a complete decontrol of the sector is not possible," the paper says. When ready, FAI will submit the report to the Government for its consideration while working out new policy parameters.

The paper states that the concessions for gas-based units should be based on the import parity prices of urea. The Government can fix a floor price and a ceiling price, and as long as the import prices vary between the two prices, the units should be reimbursed on the basis of import parity prices. Since the units are open to input price and exchange rate risks, FAI wants the Government to set the initial floor prices "higher than currently obtaining concession."

The FAI says top priority should be given to the fertiliser industry for allocation of gas as the Government's policy directions indicated that non-gas plants should switch over to natural gas as feedstock. It also wants the Government to come out with a long-term policy in respect of allocation of natural gas, which should be supplied at international prices.

"The feedstock to fertilisers should be regulated and not left to so called market forces."

During the past few years, the draft paper states, the Government has made efforts to reduce subsidy at the cost of the industry without tackling the factors responsible for the increase in total subsidy amount. Consequently, the fertiliser sector has become unattractive for investors.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page