The Hindu Business Line : Fertiliser units await outcome of today’s Cabinet meeting

What industry wants
Like China, ban exports of sulphuric, phosphoric acid
Announce subsidy policy that will hold for 5 years
Disburse subsidy in cash, not in bonds

R. Balaji
M. Ramesh

Chennai, June 11 With cost of key inputs such as phosphoric acid going through the roof, Indian fertiliser producers are waiting for the announcement of a fertiliser policy, which they hope will cover costs and give a return.

As such, they are eagerly looking to the outcome of a Cabinet meeting that is to happen on Thursday. The meeting is to be chaired by the Prime Minister and is expected to bring out a fertiliser policy.

As of today, there is no policy. The subsidy policy for Diammonium phosphate (DAP), Muriate of Potash (MOP) and NPK fertilisers expired on March 31, 2008.

With costs increasing, manufacturers are facing a severe liquidity crunch. Unless an early decision on the support policy is announced, fertiliser units would not be able sustain production.

When contacted, Government officials declined to comment on when an announcement is likely.

Manufacturers said that unlike the previous policy that was in place for one year, the support policy to be announced should spell out a medium-term plan — at least for five years – for the industry to plan its production and strategy.

Fertiliser units demand that subsidy should be disbursed in cash to support industries’ cash flow rather than be issued as bonds. The bonds sell in the market for discounts, nibbling away at margins, and create liquidity problems, they noted. After all, inputs are paid for in cash. Manufacturers import raw materials for cash, they pointed out.

Also, the Government should come out with measures to support domestic manufacturers by banning export of raw materials such as sulphur, sulphuric acid and phosphoric acid.

This is all the more necessary because the global fertiliser industry is at the hands of two large players — OCP of Morocco and Phoschem-Mosaic of the US — who cartelise and fix prices, sources said.

“Even as the fertiliser industry is facing crippling supply-side constraints in getting raw materials, Indian producers of sulphur, sulphuric acid and phosphoric acid are merrily exporting the products,” sources in the fertiliser industry said, calling upon the government to ban the exports.

Asked if banning exports of a commodity would be feasible in a free market, the sources noted that if there was no ban, the domestic industry may have to close down and India will have to face the consequences such as loss of economic value addition in the country and a huge import bill.

Exports

India produces about 8 million tonnes of sulphuric acid and is expected to export nearly a third of its production this year. Sulphur and phosphoric acid are also being exported, the manufacturers said.

If the exports are banned, India would not have to import at high costs.