Short-sighted policy (SSP)

The problems created by the flawed partial decontrol of phosphatic and potassic fertilisers in 1992 are still haunting the industry. To begin with, it was no decontrol at all as it merely replaced "subsidy" with "ad hoc price concession", which seems to have become permanent.

Worse still, while the task of fixing farm gate prices for most phosphatic and potassic fertilisers was entrusted to the Centre, that for single super phosphate (SSP) was given to state governments, which are involved neither in production nor distribution of this fertiliser, nor even in its subsidy disbursement.

The subsidy on all decontrolled fertilisers is borne by the Centre. The logic for singling out of SSP for this purpose was as obscure then as it is today. But its adverse consequences for the SSP industry have been starkly clear.

As could be expected, the state governments have not revised the retail prices of SSP for years, though the production costs have shot up due to sharp increase in the international prices of both rock phosphate and sulphur, the two main ingredients of SSP.

To confound matters, the Centre, too, has not revised the subsidy on this particular fertiliser for unexplained reasons though it has done so for other fertilisers to offset the higher production costs.

This has, predictably, eroded the viability of the Rs 900-crore SSP industry. Nearly half the units are said to have shut down while most others are operating at less than half the rated capacity.

Indeed, SSP has a unique place in crop nutrition. For, besides being the cheapest source of phosphorus, it is the sole carrier of sulphur, a micro-nutrient which is deficient in about 40 per cent of Indian soils.

Sulphur is deemed essential for optimum plant growth and yield of oilseeds and pulses, both of which are in short supply and are imported in large quantities to meet the domestic demand. Significantly, the need for subsidy on SSP, too, is very small compared to other fertilisers, about half that of its main alternative di-ammonium phosphate (DAP).

If the principle of parity with DAP in terms of phosphorus content is applied, the price concession on SSP needs to be stepped up to only Rs 1,300 per tonne (from the present Rs 650), against Rs 6,000 a tonne being paid on DAP fertiliser.

Thus, even after upward revision in the subsidy on SSP, the government's overall fertiliser subsidy will not rise as the additional outflow will be set off against the drop in the DAP subsidy bill.

Indeed, the ideal course of action under these circumstances would be to go in for total decontrol of all fertilisers, including SSP, by stopping price fixation and the doling out of subsidies.

However, since this may not be politically feasible, considering the sensitiveness of political parties to fertiliser pricing, the next best thing for the Centre would be to take on the job of fixing SSP prices, instead of leaving it for the states.

For this, a cost escalation-linked pricing mechanism, similar to the one for DAP, could be evolved. In any case, a solution needs to be found and enforced without delay.

Otherwise, not only will the entire SSP industry go under, soil fertility will also suffer irretrievable damage, especially in the already sulphur-deficient lands.