The Hindu Business Line : FERTILISER FETTERS

The Fertiliser Minister, Mr Ram Vilas Paswan's suggestion that total control be reimposed on fertiliser movement springs from a misdiagnosis of the problem, if indeed there is one, of fertiliser availability. If the Government initially thought that partial control on distribution is the best way forward in achieving uniform fertiliser availability across the country, then it ought to have proceeded against companies that brazenly violated allocations made under law, rather than threaten the industry now with re-imposition of full-scale control.

But that apart, the proposal also defies conventional economic logic. The Minister has spoken of companies confining their marketing efforts to areas close to their plants. In an era of globalisation, where distances have ceased to matter, one can safely assume that any company would be keen to move its product wherever it can find a buyer, provided it can make a profit on it. If, on the other hand, a company is catering to the needs of farmers located close to its plant and exhausting, in the process, its production capacity in full, it should be encouraged to do so. Indeed, it may even be complimented for reducing the subsidy burden on the Government for it is saving the latter reimbursement of transportation costs.

Since companies themselves are best equipped to minimise the transportation costs, the resulting arrangement is socially desirable as it reduces the overall subsidy burden on the Government in reaching fertiliser to the farmers. Of course, in the process operating in markets close to where individual units are located, some pockets of shortage may emerge. But this has to be met out of imports and using either the Government's own distribution network or that of private trade. If companies would rather under-produce than fulfil the quota allocated to them by the Government, it only means there is something wrong in the manner in which producers are compensated by the Government for selling fertiliser below cost. The problem thus lies in the pricing scheme rather than in the principle of distribution quotas or its implementation.

In any case, the Government has been sitting on capacity expansion proposals of individual producers, thereby accentuating the shortages, such as there are. An expeditious clearance in itself would provide the right incentive for the industry to look aggressively at expanding market presence across the length and breadth of the country. It is ironic that a Government that is capable of intervening on a massive scale by mopping up food surpluses from the farmers and reaching them to consumers should find the task of making fertilisers available to farmers so daunting.

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