Approving a department of fertiliser's proposal on extending concession on phosphatic and potassic fertilisers, the government on Thursday said the move would help shrink its subsidy bill by Rs 1,163 crore. The cabinet committee on economic affairs (CCEA) on Thursday approved the proposal on hitherto de controlled phosphatic and potassic fertilisers.
The CCEA also approved ONGV Videsh’s investment in exploration in Trinidad & Tobago and Brazil. OVL would invest $155 million for phase I exploration in Trinidad & Tobago and $137 million and $145 million in two blocks in Brazil. Among other decisions, it also approved adoption of cruise shipping policy that would help increase the domestic industry's share, that is at present just 2 per cent, in $14-billion global leisure industry.
The new fertiliser scheme, to be implemented with effect from April 1, 2008, envisages reduction in subsidy outgo to Rs 1,163.79 crore. It is based on rationalisation of methodology and costing of nutrients as estimated by a tariff commission, Prithviraj Chavan minister of state at Prime Minister's Office said.
The concession scheme on phosphatic and potassic fertilisers, which lapsed on this March 31, included DAP, MOP, MAP and 11 grades of complex fertilisers. The present proposal is based on a fresh cost price study conducted by the tariff commission and long-term approach suggested by an expert group, chaired by Abhijit Sen on phosphatic fertilisers.
The new scheme includes triple super phosphate, which is a cheaper substitute for DAP, to provide access to alternative supply of phosphatic fertiliser that would also lead to savings in subsidy. As per the new scheme, indigenous DAP has been brought on par with imported DAP for calculating concessions. “Providing concession to indigenous DAP on basis of import parity price will ensure competitiveness and provide a rational basis for payment of concession,” J S Sarma fertiliser secretary said.
The scheme besides providing a long-term perspective to the fertiliser industry would help them explore new and cheaper source of phosphatic and potassic raw material, intermediaries and finished fertilisers. The move would also help Indian farmers meet nutrients requirement suitable to the soil type, Sarma said.
Pricing of phosphate will now be determined through a calculated price following an expert group formula for determining the nutrient that is based on the delivered cost of DAP. While the pricing of nitrogen would be adopted for two years (as per expert group formulae).
In order to encourage fertilizer industry to seek out long term supply arrangement for fertiliser raw materials at lower prices, the government has introduced an 'Outlier' concept for computation of final rates. If the prices of procurement of raw material prices is lower by 5 per cent or $ 30 as compared to the industry average. The difference between the industry average and outlier would be shared between the company and the government on 65:35 basis.