The Hindu Business Line : Fertiliser subsidy may go up by Rs 2,000 cr next fiscal: Paswan

New pricing scheme All non-gas based urea producers given 3 years to convert into gas-based units Subsidy will be cut if companies fail to convert Actual freight rates for rail, road movement to be reimbursed

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New Delhi Feb. 2 With rise in fertiliser consumption in the country the total subsidy amount is likely to go up by another Rs 2,000 crore in 2007-08, the Minister for Fertilisers and Chemicals, Mr Ram Vilas Paswan, told reporters here today.

During 2007-08, the total figure stands at Rs 34,000 crore which includes Rs 6,000 crore backlog of 2005-06. Out of this Rs 22,000 crore has already been cleared till December when the Ministry of Finance released the second phase and has promised to clear the remaining Rs 12,000 crore by March-end, Mr Paswan said.

New pricing scheme

About the New Pricing Scheme (NPS) phase III, which was cleared by the Government on Thursday, the Minister said that domestic companies would be encouraged to set up joint ventures abroad where gas is available cheap and there is abundance of raw materials.

The new scheme would also encourage companies to produce beyond their installed capacities without any prior approval from the Government. "This would encourage them to increase production because according to the new scheme they would be able to retain higher profits beyond 10 per cent additional output," Mr Paswan said.

Mr Paswan said that all non-gas based urea producers have been given three years time to convert into gas-based units under NPS III.

"If they fail and continue to use naphtha or other feed stocks then subsidy will be cut," he said.

Distribution network

Asked if the conversion is delayed due to non-availability of gas, the Minister said: "This is a Government policy based on the assurances received from the Petroleum Ministry. If the Government is not able to supply gas then steps would be taken at that time. We cannot decide from now," he said.

However, the Minister said that the individual companies would be entering into time-bound supply agreements with the supplier companies. If the gas companies fail to supply then the fertiliser units would be charging them demurrages," he said.

The NPS III aims to establish a more efficient urea movement and distribution network with the objective of ensuring availability of urea in all parts of the country.

He also stated that to ensure timely availability of urea in the remotest part of the country, States have been asked to give the exact requirement estimates after assessing the situation, he said.

Mr Paswan said the Centre has decided to bring out advertisement in newspapers stating the requirement of States before the beginning of the kharif season. This will ensure that States do not change their estimates frequently.

Reimbursement

To ensure smooth movement of fertiliser to far-flung areas, the new scheme also provides for reimbursement of actual freight rates for rail and road movement from the main points to the villages. For this the extra subsidy amount would be around Rs 100 crore, he said.

The Department of Fertilisers would also operate a buffer stock through the State institutional agencies or fertiliser companies in major consuming States up to a limit of 5 per cent of their seasonal requirement to meet unexpected spurt in demands or local shortages. "Maintaining the stocks at the State centres would enable speedy transfer of materials at shortage points instead of the present practice of diverting from one State to another," he said.