Unlike other regulated sectors, price approval in the fertiliser segment is crucial as the farm gate price of the fertiliser is only a fraction of the actual production cost. The rest has to be reimbursed by the government as subsidy and the companies need to know the subsidy component before fixing retail prices.
"Even though three months have passed since the last policy lapsed, a new one has not been approved. Unless this happens, the industry will not know the cost of raw materials or the cost of finished fertilisers that will meet government approval. The liquidity position of the companies is really bad," said Satish Chander, director general, FAI.
"The companies are supposed to sell DAP fertiliser at a maximum price of Rs 9,350 per tonne, which represents only 15-17 per cent of the delivered cost. The balance 82 -85 per cent are to be realised from the government," he added.
According to Chander, the outstanding fertiliser subsidy bill up to March 31, 2008, was Rs 8,000-10,000 crore.
