The Hindu Business Line : Increase subsidy or we will close down, DAP units tell Govt

THE Phosphoric Acid Consumer Group (PACG) headed by the Tata Chemicals Managing Director, Mr Prasad Menon, has informed the Government that di-ammonium phosphate (DAP) producers plan to close down their operations if the Government does not provide subsidies at a higher level consistent with current global prices of phosphoric acid - the main input for making DAP.

In a letter submitted to the Cabinet Secretary on Monday, a copy of which is available with Business Line, the consumer group said, "This year, international prices of all inputs have gone up and after three rounds of negotiations, the PACG, comprising all major DAP manufacturers settled a price of $402.75 CFR per tonne with 120 days credit in April 2004. However, till date, the Government has not recognised the new price in the subsidy fixation and this has affected the profitability, liquidity and viability of DAP manufacturing units leading the industry to seriously contemplate closure."

PACG consists of 12 companies, namely: Coromandel Fertilisers, Deepak Fertilisers, FACT, GFCL, GSFC, HLCL, IFFCO, MCFL, MFL, PPL, Tata Chemicals and Zuari Industries.

Simultaneously, a major crisis has cropped up in the States due to non-availability of single super phosphate (SSP), another complex fertiliser.

Many State Governments have approached the Centre for initiating steps to increase the supply of SSP to them.

According to the Fertiliser Association of India (FAI), most SSP manufacturers are currently operating at around a quarter of their capacities. SSP is the oldest form of inorganic fertilisers used in India and it is critical because the average sulphur content in Indian soil is below average.

The number of SSP manufacturers in the country has come down from around 90 a few years ago to only 64 now. Production has declined by 34 per cent from 3.8 million tonnes in 1997-98 to 2.5 million tonnes in 2003-04. This fiscal a number of units have already stopped production.

This is due to the abnormal increase in the price of sulphur in the international market. Currently, the Government gives a subsidy of Rs 650 per tonne of SSP to the manufacturers, which was fixed in 2002.

But the prices of the two main inputs (sulphur and rock phosphate) have gone up by almost 100 per cent for sulphur and 30-40 per cent for rock phosphate during this period.

This has put tremendous pressure on the producers whose price realisation, including the subsidy, has become substantially lower that the production cost.

More Stories on : Fertilisers | Fertilisers

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