The Hindu Business Line : Ministry concerned over higher subsidy on imported DAP

The estimated subsidy per tonne of imported DAP for the July-September quarter stood at Rs 5,394, substantially higher than the Rs 4,564 for the indigenously produced DAP.

New Delhi , Nov. 25

A PIQUANT situation has cropped up in the subsidy provision for di-ammonium phosphate (DAP). While the Government is still undecided on the subsidy component for imported phosphoric acid, which determines the effective subsidy rate for indigenously produced DAP, for the current fiscal, the Centre has actually ended up paying substantially higher subsidy for imported DAP.

This in effect means that the subsidy is actually going to certain foreign fertiliser producers while domestic companies are sitting over idle capacities.

Worried over the situation, the Fertiliser Ministry convened a high-level meeting to take stock of the situation.

DAP is a decontrolled complex fertiliser containing three plant nutrients — nitrogen, hydrogen and phosphorus. The sowing for the rabi crop has begun and the demand for DAP is high across the country as it is needed more in the initial weeks of sowing.

Since most domestic manufacturers are producing much less than their installed capacity, large quantities have been imported at high prices resulting in huge estimated subsidy outflows.

The estimated subsidy per tonne of imported DAP for the July-September quarter stood at Rs 5,394, substantially higher than the Rs 4,564 for the indigenously produced DAP.

According to industry estimates, 2 million tonnes of DAP were imported during the first two quarters of the current fiscal.

The industry also feels that the revised estimate for subsidy on imported DAP would go up to Rs 5,800 for the second quarter.

DAP units in the country are perpetually under pressure because of poor availability of phosphoric acid, a critical raw material that is scarce in India. India needs 5 million tonnes of phosphoric acid of which 50 per cent is imported. Globally, only a handful of countries supply phosphoric acid and traditionally prices skyrocket every year as soon as India enters the market. To shield itself from the volatile situation, FFCO, the largest domestic fertiliser manufacturer, has formed a joint venture company in Egypt for manufacturing phosphoric acid to feed its plant in Kandla.

Domestic DAP makers are still being subsidised at the interim rate based on the phosphoric acid price of $431 per tonne instead of the agreed price of $445 per tonne.

Among the domestic manufacturers, industry sources said that FACT, Madras Fertilisers and Oswal have stopped production and companies such as GSFC and Tata Chemicals too are operating at around 60 per cent capacity. The other three private manufacturers — Zuari Agro, Coromandel Fertilisers and Godavari Fertilisers — too are feeling the pressure and are said to be on the verge of cutting output.

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