Govt may dismantle fertiliser group retention pricing

The government will consider dismantling the group retention pricing introduced from April 1, 2003, to help "outliers' such as Madras Fertilisers Ltd (MFL) survive.

It will also revisit the limited decontrol of urea distribution that was flagged off by the previous government.

Speaking to media persons in Chennai on Sunday, Ram Vilas Paswan, Union minister of chemicals & fertilisers and steel, informed that the committee headed by the former minister of state for fertilisers, Rehman Khan, has submitted its report recommending the change of the pricing policy, in the light of the anomalies found in the current scheme. The report will be examined by the Cabinet before a decision is taken.

"Though MFL is a loss making PSU, disinvestment would be our last resort," he said.

He added that the government is also not keen to close down the plant, instead it will consider possibilities of keeping it going for the next 3-4 years until it can be converted into a gas-based plant, "once gas becomes commercially available".

His reference was to the gas pipeline project from Oman to India. MFL, which is one of the few naphtha-based plants still in operation, can switch to gas-based production with an investment of only Rs 5-7 crore, Sukumar N Oommen, chairman and managing director, MFL, informed.

Meanwhile, the PSU has accummulated losses of Rs 206 crore as in March 2004, completely eroding its networth. Oomen has been saying that the reversal to the old pricing policy will effectively put the company back in the black.

In the current scheme of things, MFL, is unable to command a higher depreciation benefit against the Rs 487.47 crore and Rs 601.43 crore investments it made in 1993 and 1998, respectively.

As an outlier (paying far high price for its feedstock than the others in its group) it is also not finding the 50 per cent subsidy being offered to it, adequate. (MFL, which largely procures its naphtha from Chennai Petroleum Corporation Ltd, pays much higher price for the feedstock than that quoted by FACT in Kerala, which is taken as the base price for the group.)

Oommen has been called over to Delhi for talks on MFL's situation next week, the minister said.

Paswan clarified that MFL's case will not be taken up in piece-meal but the entire policy would be reviewed.

He also informed that he has called for a meeting of all the State Agricultural Ministers on August 25 to reconsider the previous government's decision to free distribution of urea upto 50 per cent.

The minister was pretty strong in his objection to the total decontrol of urea, as recommended by the Expenditure Reforms Commission (ERC) in 2000.

Meanwhile, Paswan is proposing to bring more drugs under government control.

"Currently only 74 of the drugs have been kept under statutory price control, under the Essential Commodities Act," Paswan pointed out to the media here on Monday. "I want all life saving drugs to be brought under government vigil and have asked for a list," he explained.

Now he plans to bring about 300 drugs under the price control regime. To do this, he will have to deal with the State governments' levy of taxes on the drugs.

"I have called for a meeting with all the State Health and Finance Ministers, to take up this issue, on August 18," he told.

The Drugs Price Control Order (DPCO), 1995, had authorised National Pharmaceutical Pricing Authority (NPPA) to enforce its stipulations in terms of pharmaceutical pricing and other provisions.