Murugappa group head hopes Budget will clear fertiliser industry’ s subsidy backlog

The fertiliser industry hopes that the Budget will reduce customs duty on raw materials such as phosphoric acid, sulphuric acid, ammonia and potash, which are on a par with that on the finished products such as diammonium phosphate (DAP). “Raw materials used to make phosphatic fertilisers should bear only 1 per cent duty and the finished product 5 per cent,” A Vellayan, Chairman, Murugappa Group, which includes Coromandel International, a leading fertiliser company, said.

Fertiliser companies haven’t been paid ₹5,000 crore in subsidy since 2012. The industry is incurring an interest loss of ₹600 crore. Payment procedures need to be corrected to enable disbursement, he said.

Vellayan explained that adequate allocations of subsidy have to be made in the Budget to clear the backlog within the next few months. For the last five years there has been a shortfall of ₹20,000-₹30,000 crore in budget provision and this has lead to delay in subsidy payments, he said.

Single Super Phosphate (SSP), which is the ideal fertiliser for the small and poor farmers, is currently denied freight reimbursement. If a reimbursement of ₹200 per tonne is given, as in 2011, it will improve capacity utilisation. This will help to avoid import of five lakh tonnes DAP. Subsidy disbursements for SSP should be on basis of receipt in district as in the case of other fertilisers and unnecessary controls on raw materials have to be removed, he said.

Urea subsidy has to be cut to avoid over-use of the fertiliser and improve soil health and farm productivity, Vellayan said. Even if urea price is increased by ₹200 a bag, it will go half way towards Nitogen-phosphorous-potash (NPK) balance of 4:2:1 and save ₹12,000 crore in subsidy.

Vellayan said that urea imports should be decontrolled for the private sector to ensure more effective buying and distribution. Imports are now channelised and handled by a few agencies.

The policy for additional production of urea by revamping existing plants introduced in 2008 has to be based on a realistic estimate of import parity price. This will bring in an additional capacity of about 2.5 million tonnes of urea which has become unviable. If this urea can be produced in India it will bring down import dependence and save foreign exchange, he said.

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