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Phalguna Jandhyala
Richa Mishra

New Delhi, Jan. 13

With private sector players ready to tap opportunities in the fertiliser sector coupled with growing global competition, the Government is preparing itself by adopting an arm’s length approach to handling the contentious issue of pricing.

The sector, which is heavily subsidised, is all set to get an independent regulator to determine the pricing of fertilisers.

The Department of Fertilisers is planning to approach the Cabinet next month to seek its approval for setting up a regulator for the sector.

An official source told Business Line that a Group of Ministers (GoM) on fertilisers headed by the Agriculture Minister, Mr Sharad Pawar, has given its in-principle nod to the Department to go ahead with the proposal. “We are currently working out the framework and the powers that the regulator will have. The whole process is likely to be completed by the end of this month and the Department is likely to approach the Cabinet in February,” an official said.

He added that the idea of the Department is to complete all the formalities and have the regulator in place before the end of the current financial year.

Asked whether for a sector that is heavily subsidised, a regulator will be successful in deciding a market determined price, the official said, “The regulator will be given a free hand to work on the pricing.” Indications are that the regulator would be working out the price based on the cost of production, how much the Government can afford, as well as factor in the subsidy aspect.

According to estimates, the Government currently subsidises around 56 per cent of the total cost of the fertilisers.

Besides, with the market becoming competitive, it is now increasingly getting tougher for the Government to fix fertiliser prices.

There are issues like international prices, raw material costs and freight charges, which need to be considered before fixing the final price of the product. This requires lot of monitoring, which a regulator can do more effectively, he said.

“Also, since we are looking at moving towards a nutrient-based subsidy regime, wherein around 80 fertilisers and complexes in the Fertiliser Control Order (FCO) will be brought under the subsidy basket, it would be increasingly difficult for the Government to look into the pricing issues,” the official added.

On whether the Department was open to having a common regulator for the fertiliser and the related sectors, the official said, “We are not opposed to the idea. A common regulator would be welcome, provided that the interests of the sector are taken care of. Each sector has its own specifications and a common regulator may face technical problems. However, a common regulatory appellate tribunal would be more appropriate.”

The GoM, which is examining the possibility of shifting to a nutrient-based subsidy regime and also on the new investment policy for the sector, is slated to meet on January 18. The GoM has already met thrice.

More Stories on : Fertilisers | Policy | Regulatory Bodies & Rulings

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