The delay in announcement of subsidy rates for de-controlled phosphatic (P) and potassic (K) nutrients for the current fiscal has put the fertiliser industry in a quandary.
While the new subsidy rates should have been effective from April 1, fertiliser makers are currently tagging bags with the maximum retail prices (MRP) of the last rabi season printed on them.
This, even as it is expected that the Government would lower the subsidy rates in line with the fall in international prices.
Currently, di-ammonium phosphate (DAP) is being imported into the country at a landed cost of around $520 a tonne, against $580.
Likewise, imported muriate of potash (MOP) is now being quoted at $430 compared with $490 a tonne last year.
Despite the fall in global prices, fertiliser firms are still printing the MRP for DAP and MOP at the last rabi season levels of Rs 24,000 and Rs 17,000.
reduction
Strictly speaking, since the subsidy rates on these have been unchanged, they ought to have reduced the MRPs in line with the falling international prices.
“But we cannot do this because the Government may any day announce the lower subsidy. If we reduce the MRP now and then the Government lowers the subsidy, the MRPs will have to be revised upward all over again,” an industry official pointed out.
For 2012-13, the Government had announced the NBS (nutrient-based subsidy) rates on March 1, 2012 – a month ahead of the fiscal. But this time, it has not done so even as the first month of the fiscal is virtually over.
Subsidy rates
So, there are a lot of bags being sold, based on the subsidy rates of last year.
This does not include the carry forward stocks of some eight million tonnes from last year, the official noted.
According to him, the industry would be happy if the subsidy rates were retained at the 2012-13 levels.
“It will give us the leeway to reduce the MRPs for DAP, MOP and complexes, which we are unable to sell because farmers are not willing to buy at the current rates. If we lower them, we will be able to clear our accumulated stocks.”
But then, the Government will have to be prepared for a higher subsidy bill.
In fact, the fertiliser ministry has suggested a 14 per cent cut in di-ammonium phosphate (DAP) and 19 per cent reduction in MOP prices for the current fiscal.
In March, the fertiliser ministry had suggested a cut in DAP subsidy by Rs 2,000 a tonne and for MOP by Rs 2,700 a tonne for 2013-14.
The subsidy on DAP is likely to be pegged at Rs 12,350 a tonne for 2013-14, down 14 per cent against last year’s Rs 14,350.
Similarly, the subsidy for MoP was likely to be pegged at Rs 11,740 a tonne in 2013-14, down 19 per cent against last year’s Rs 14,440 a tonne.