The Centre has quietly restored pricing freedom for manufacturers/importers of di-ammonium phosphate (DAP) and other non-urea fertilisers.
This comes just two months after it had sought to set limits on the extent of price increases in these “decontrolled” fertilisers.
On May 5, the Department of Fertilisers had issued a notification stating that “companies have the freedom (sic) to increase the MRP (maximum retail price) of DAP by Rs 600/tonne in addition to the MRP prevailing at present (Rs 10,750/tonne).”
Even for complex fertilisers – containing varying proportions of nitrogen, phosphorous, potash and sulphur – only “proportionate increase in MRPs (corresponding to that in DAP)…would be admissible.”
The notification would have resulted in an “admissible” MRP of around Rs 11,470 a tonne for DAP (Rs 11,350 plus the 1.03 per cent excise-cum-education cess imposed in the 2011-12 Budget, which is “recoverable” from farmers).
But now, through a fresh notification dated July 8, the Department has withdrawn the paragraph prescribing how much companies can raise MRPs.
It has, instead, inserted a revised paragraph simply stating that the market price of non-urea fertilisers “will be open.” Companies would only be required to fix these “at reasonable level,” though there is no definition of what “reasonable level” might amount to.
According to sources, the decision to rescind the May 5 notification was actually taken by the Union Cabinet at its meeting on June 30. “For obvious reasons, the Government felt it was not worth publicising and the safest way would be to notify it through the Department of Fertilisers,” they pointed out.
But the May 5 notification was, in any case, hardly being adhered to on the ground, with most companies charging an MRP of Rs 12,000 a tonne for DAP, net of State-level levies. Inclusive of value added tax (VAT), farmers have been effectively paying Rs 12,500 to Rs 12,600.
“Moreover, these rates are based on landed prices of $615 a tonne for DAP and the $980-a-tonne rate negotiated for phosphoric acid (the key input in DAP) during the April-June quarter,” the sources noted.
Another price hike?
Currently, imported DAP is ruling at $650 a tonne (cost and freight, Indian ports). While Indian companies have not so far contracted any phosphoric acid imports for this quarter, the indicative quotes being received are for upwards of$ 1,050 (against $ 980, $ 840 and $ 780 a tonne for the preceding three quarters).
At $650-a-tonne for DAP and $1,050 for phosphoric acid, the corresponding MRP for DAP, inclusive of VAT, works out to roughly Rs 14,300 a tonne. We will have to take a call whether to raise prices in the ongoing kharif season or wait till the next rabi plantings,” said a leading manufacturer.
The Centre, on its part, has granted – or rather, restored – to companies the freedom to pass on their increased costs to farmers. “The Government has no choice really: The alternative would have been to either risk shortages or fork out a higher subsidy bill,” the manufacturer added.