Oct. 18, 2016
In a setback for domestic firms engaged in production of phosphatic (P) and potassic (K) fertilisers, the ministry of chemicals and fertilizers has rejected the recommendation made by an inter-ministerial committee (IMC) to supply subsidised pooled gas to such units, said government officials.
With natural gas being a key feedstock used in production of soil nutrients, the government last year approved gas supply at uniform price to all fertiliser units for urea production through a pooling mechanism. However, the guidelines related to supply of gas to fertiliser units producing phosphatic and potassic nutrients are yet to be finalised.
“The IMC had recommended supply of pooled gas should also be in place for P&K producing firms. This was done in order to meet the desired objective of balanced use of fertilisers in the country. However, the recommendations have been turned down,” said a senior government official requesting anonymity.
This comes at a time when the National Democratic Alliance government is ensuring that farmers get adequate supply of fertilisers in a year when the monsoon has been normal after two years of drought.
The committee, headed by fertiliser secretary Vijay Shankar Pandey, had in August recommended to supply pooled gas meant for urea production to units manufacturing P&K fertilisers, as reported by InfraCircle on 11 August.
In 2010, the government had given a go-ahead for nutrient-based subsidy policy for P&K fertiliser producers. This resulted in market pricing of these fertilisers as opposed to urea, the most commonly used fertiliser in India, which is controlled and currently sold at a fixed price. Given the market pricing for P&K fertilisers, the government in 2014 decided to divert the subsidised gas to urea plants.
The issue had been referred to the minister for chemicals and fertilisers Ananth Kumar, after which it was expected to be sent for Cabinet’s nod. Phosphatic fertilisers contain phosphorus in any organic or inorganic form, and include the commonly used di-ammonium phosphate. Potassic fertilisers are the ones which contain potassium in absorbed form. The commonly used potassic fertilisers include muriate of potash and sulphate of potash.
Another government official, who also did not want to be named, said, “The matter was pending for long and has been rejected. The reason for arriving at this decision may be because the ministry wants to promote competition among the industry participants amid falling gas prices. Also, there were certain apprehensions that companies may not pass on the benefit of pooled gas to consumers,” added the official.
InfraCircle had earlier reported that the Union government planned to recover Rs.1,500 crore as dues from Deepak Fertilisers, Rashtriya Chemicals and Fertilizers Ltd (RCF) and Gujarat State Fertilisers & Chemicals Ltd (GSFC) for using subsidised fuel to manufacture non-urea fertilisers.
Queries emailed to the spokespersons for the ministry of chemicals and fertilizers on 5 October remained unanswered. Spokespersons for Deepak Fertilisers, RCF and GSFC couldn’t be immediately contacted.
Analysts believe that a final decision in this regard should be taken on a priority basis. “This issue has been lingering on for some time. Any decision will help the companies tie up for required amount of gas they require,” said K. Ravichandran, senior vice-president and co-head, corporate ratings at Icra Ltd.
The government has made a provision of Rs.70,000 crore on account of fertiliser subsidies in the Union budget of 2016-17.