Budget merely repeats last year’s changes.
Having gone through a prolonged bad patch, the fertiliser sector was expecting some fresh initiatives in the 2009-10 Budget, that would build on recent changes in subsidy and pricing policies and put the industry on a sound footing. In the event, what has been doled out in the Budget has given cold comfort. The finance minister has said the government intends to introduce measures that have either already been taken, or have been announced and are awaiting implementation.
It is worth recalling what Pranab Mukherjee actually said on fertiliser in his Budget speech: “To ensure balanced application of fertilisers, the government intends to move towards a nutrient-based subsidy regime instead of the current product pricing regime.” Actually, as has been mentioned in the Economic Survey presented to Parliament just a day or two before the Budget, nutrient-based subsidy pricing has already been introduced last year; as a result, the prices of various complex fertilisers were slashed by 18 per cent on average. Mr Mukherjee also expressed the hope that the nutrient-based subsidy regime would lead to the availability of innovative fertiliser products at reasonable prices. In reality, even this objective was realised in the last fiscal by allowing fertiliser manufacturers to charge an additional price to recover the cost of coating or fortifying fertiliser with secondary or micro-nutrients.
The manufacturers of customised fertiliser (referred to by Mr Mukherjee as ‘innovative fertiliser products’) have already been permitted to fix their own prices, to encourage the production and use of crop-specific and location-specific fertiliser. This move was aimed at ensuring need-based and balanced application of fertiliser nutrients, rather than excessive use of nitrogenous fertiliser, notably urea, because of the higher subsidy (and therefore) lower cost that it carries. Even the concept of direct transfer of fertiliser subsidy to farmers, which the finance minister said would be implemented in due course, is not wholly novel though no satisfactory method of doing this has yet been found. The fertiliser industry has been pressing the government to spare it from the burden of serving as a conduit for passing on the subsidy to farmers as it involves belated reimbursement of subsidy dues, causing a liquidity crunch.
The optimism expressed by the finance minister about fresh investment coming into the fertiliser sector — which has not happened for nearly a decade now — is not without basis as some well thought-out measures have already been taken for this purpose. The most significant was the introduction of import parity pricing for computing the concession on urea produced from fresh capacity addition. Though prospective investors have been enthused by this, the subsequent softening of international prices in the wake of the global economic slowdown has taken away part of the gains expected from the policy change. If the finance minister has something up his sleeve for making investment in the fertiliser industry really gainful, which he has not spelt out in the Budget, that is what will mark a breakthrough for the fertiliser industry.
