Fertiliser industry seeks CCEA's speedy decision on sops

The Phosphoric Acid Consumer Group (PACG) has sent a letter to the Government of India urging a speedy decision by the CCEA (Cabinet Committee on Economic Affairs) on the issue of subsidies for sale of de-controlled fertilisers such as di-ammonium phosphate (DAP), muriate of potash (MOP) and complex fertilisers.

Addressing a select media gathering in the city, A Vellayan, director (marketing), Murugappa Group, and a member of the PACG, said: "The fertiliser industry in India is heavily dependent on phosphoric acid and prices of phosphoric acid have gone up globally to touch $452 per tonne. We are still getting subsidies from the government at the old rate of $350 per tonne."

The delay in taking a decision has meant that close to a quarter in the new financial year has gone by and fertiliser companies have had to absorb the increase in input costs. The delay in decision-making has been attributed to the recent elections and the resultant change in government at the Centre.

The Department of Fertilisers had recommended additional fund allocations for the current financial year on account of an increase in prices of various raw material costs such as phosphoric acid, MOP and ammonia.

"The fertiliser industry in the country is heavily dependent on phosphoric acid and potash import and is continuing the production of phosphatic fertilisers in good faith despite a lack of clarity on the subsidy front," Vellayan said.

"The import of raw materials are finalised on an annual basis. On the recommendation of the government, we had formed this consumer group consisting of 12 major DAP plants in India of both private and public sector companies,"Vellayan said.

The PACG has on behalf of the industry negotiated with phosphoric acid manufacturers for close to three months and clinched a deal at a price of about $398.72 and $402.75 per tonne as against the quoted price of $452.

"While, last year the price was $350 per tonne it is a fact that international prices fluctuate based on demand-supply, ocean freight and input costs."

This apart, most of the phosphoric acid suppliers like Morocco-based OCP, Senegal's ICP, Jordan-based JPMC and Foskor of South Africa are government-owned companies and suffered heavy losses during the last financial year due to the low price of acid at $356 per tonne.

Vellayan pointed out that there would be a certain shortfall in the availability of DAP this year in India.

"The option of importing DAP would work to be a far costly affair for the government if it were to do so. At present, 40 per cent of DAP production is controlled by Cargil and prices are at a record high of $300 per tonne as against $175 - $200 last year. This would mean a steep increase in the fertiliser subsidy bill which will be far more than what would be payable by the government for the revised prices of phosphoric acid."