Has the Centre brought back price controls in ‘decontrolled' non-urea fertilisers?
It would well seem so, going by a recent circular by the Department of Fertilisers asking firms to limit the increase in the maximum retail price (MRP) of di-ammonium phosphate (DAP) to Rs 600 a tonne for the kharif season ahead.
The circular, dated May 5, says that “companies have the freedom (sic) to increase the MRP of DAP by Rs 600 per tonne in addition to the MRP prevailing at present”.
Since the MRP, prior to April 1, averaged Rs 10,750 a tonne, a Rs 600 rise works out to Rs 11,350 a tonne. To this, if the 1.03 per cent excise-cum-education cess imposed in the 2011-12 Union Budget is added — this is recoverable from farmers — the new admissible MRP would be roughly Rs 11,470.
Against this, companies like Coromandel International, Indian Farmers Fertiliser Cooperative and Zuari Industries have already declared MRPs of Rs 11,700 to Rs 12,000 a tonne, exclusive of State-level and local levies. It remains to be seen if they will now have to roll back their MRPs to the May 5 circular-prescribed levels.
The circular, moreover, has made it clear that even in the case of complex fertilisers — containing varying proportions of nitrogen (N), phosphorous (P), potash (P) and sulphur (S) — only “proportionate increase in MRPs (corresponding to that in DAP) would be admissible”.
The Centre had, with effect from April 1, 2010, decontrolled prices of all fertilisers, barring urea, as part of the move to a nutrient-based subsidy (NBS) regime. Technically, it gave companies full freedom to fix MRPs, though there was an informal understanding to keep price hikes within ‘acceptable' limits.
Thus, the MRP for DAP was raised from Rs 9,350 to Rs 9,950 a tonne during kharif 2010 and further to Rs 10,750 a tonne in the recent rabi season. “For this kharif, too, the Centre expected prices to go up by another Rs 600 or so. Instead, most companies increased their MRPs (net of excise) by around Rs 1,125 to Rs 11,875 a tonne, made worse by the excise levied in the Budget,” sources said.
The May 5 circular “basically formalises the earlier informal arrangement by prescribing how much prices can be hiked,” they added. In other words, a return to MRP controls. But this, the sources pointed out, is inevitable because so long as subsidies are given, “the Centre will always demand its pound of flesh”.
Under the NBS, a fixed per-kg concession is granted on N, P, K and S, with the subsidy on individual fertilisers linked to their nutrient content. DAP currently attracts a subsidy of Rs 19,763 a tonne, which, even after so-called price decontrol, is way above the MRP component.