Budget 2021: India fertiliser industry seeks cut in import duty on P&K raw materials

Fertilizer Association of India (FAI) on Friday demanded the government to reduce import duty on non-urea fertiliser raw materials and increase it on finished products in the upcoming Union Budget 2021 to encourage domestic production.

Currently, import duty on raw materials and finished non-urea fertilizers stands at 5 per cent except for rock phosphate and sulphur which is at 2.5 per cent.

"Globally, import duty on raw materials is kept lower than the finished products. But it is not so in our country and as a result we face still competition from imported finished phosphatic (P) and potassium (K) fertilisers," FAI Director General Satish Chander told reporters.      

The customs duty at 5 per cent on imported raw materials like phosphoric acid and ammonia and 2.5 per cent on rock phosphate and Sulphur is rendering domestic P&K fertilizer manufacturing uncompetitive vis-à-vis imports, he said.      

In its budget proposals sent to the Finance Ministry, the FAI has also sought the government to exempt raw materials/ intermediates from customs duty, or, only a nominal rate of 1 per cent customs duty be levied.      

Further, there is a need for increasing the rate of customs duty on imported P&K fertilizers to encourage domestic value addition and improving capacity utilization in P&K segment, it said.      

The industry body also demanded timely refund of unutilized input tax credit and refund against GST on input services to avoid increase in the cost of domestic production of P&K fertilizers.

Inverted duty structure of GST on ammonia and sulphuric acid is at 18 per cent compared to 5 per cent on fertilizers.

Chander said the FAI sought that there is a need for differential subsidy for domestic and imported P&K fertilizers besides priority in clearing subsidies on locally manufactured fertilisers.    

On subsidy, the industry body said there are always massive arrears and even now the payment for April-June quarter is not complete.

"But, allocation of Rs 65,000 crore under AatmaNirbhar Bharat should help clear all arrears and make the payment on weekly basis as envisaged in Direct Benefit Transfer (DBT) policy the sector," he added.

The government allocated Rs 71,000 crore for fertilizer subsidy in the 2020-21 financial year.