UPA restores fertiliser price controls, through backdoor

Has the Government rolled back price decontrol in non-urea fertilisers?

It seems so, even though under the Nutrient Based Subsidy (NBS) regime introduced from April 2010, companies have technically been given freedom to fix the maximum retail prices (MRP) of all fertilisers, barring urea.

While being entitled to also receive a fixed per-tonne subsidy for each product linked to its specific nutrient content, the MRPs themselves were, however, left ‘open’ for the companies to decide.

Reversal of policy

But now, in a virtual reversal of policy, the Department of Fertilisers has mandated that the MRPs be fixed at a ‘reasonable level’. Further, such ‘reasonable’ prices are to be based on ‘reference MRPs’ that the Department itself has determined.

Thus, the ‘reference’ MRPs of di-ammonium phosphate (DAP) and muriate of potash (MOP) consumed during the 2012-13 rabi season have been taken at Rs 24,000 and Rs 17,000 a tonne respectively.

Based on the reference prices and taking into account the new NBS rates, the Government has worked out the ‘reasonable’ MRPs during the current kharif season at Rs 22,500 a tonne for DAP and Rs 16,000 for MOP. It has prescribed similar ‘reasonable’ MRPs for 20 other fertilisers covered under the NBS system in an office memorandum dated June 26.

But the shocker for the industry is not just that. The Government has also said that if the MRPs fixed by fertiliser companies are found to be ‘unreasonable’ — in other words, more than the ‘reasonable’ levels prescribed by the Department — they shall be deemed as “indulging in undue profiteering”.

The actions in this case will include “recovery of subsidy to the extent of unreasonableness on that particular grade of fertiliser; removal of any grade/grades of fertilisers of a particular company or the fertiliser company itself from the NBS scheme and also reduction in the NBS rates”, the memorandum said.

“This is nothing but going back to the old regime. The provocation is clearly elections,” said an industry source.

In fact, even in the system existing prior to April 2010, prices of all non-urea fertilisers were technically ‘decontrolled’. But since the subsidy or concession payable to companies was subject to their selling these products at prices notified by the Government, it translated into a controlled MRP regime.

“It is the same now. If you don’t sell at the reasonable MRP determined by the Department, you don’t get subsidy,” the source added.

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