Fertilizer Pricing Policy In India

Presented by:Rohit

GauravSandipArvind

Fertilizer

• Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth".

• Sixteen elements are identified as essential elements for plant growth.

• Most important : Nitrogen, Phosphorus, Potassium.

Production and Availability

• There are 64 large size fertilizer units in the country, manufacturing a wide range of nitrogenous and phosphatic fertilizers.

• Urea – 39 units , • DAP – 18 units, • Straight nitrogenous fertilizers – 7 units,• Ammonium sulphate as a by-product – 9

units.

Total installed capacity of fertilizer production in the country

Date Production(in lakh tonnes)

Nitrogen Phosphate

1.4.1998 104.98 29.51

29.2.2000 110.71 36.48

Sr. No. Intermediate Raw Materials

1 Ammonia (NH3)

Natural GasAsscoiated GasNaphtha Fuel oilCoal   COGPowerWater

2 Sulphuric Acid (H2SO4)

SulphurPyritesPowerWater

3 Phosphoric Acid(H3PO4)

RockphosphateSulphuric acidPowerWater

4 Nitric Acid (HNO3)

AmmoniaPowerWater

Raw materials and Intermediates

Fertilizer Consumptioin

Product/ Nutrients

1996-97 1997-98 1998-99

1999-2000

(Provisional)

Kharif Rabi Total Kharif Rabi Total Kharif Rabi Total Kharif Rabi Total

In Terms of Fertilizer Material

Urea 9227.67 9796.81 19024.48 9479.08 10139.77 19618.85 9893.15 10503.28 20396.43 10156.85 10185.49 20342.34

A/S 300.58 353.08 653.66 330.37 276.13 606.5 293.25 272.51 565.76 325.78 313.11 638.89

A/C 50.87 70.19 121.06 49.83 53.75 103.58 33.8 44.85 78.65 30.84 45.18 76.02

CAN 182.91 212.21 395.12 184.88 216.62 401.5 181.65 286.57 468.22 180 167.52 347.52

SSP 1518.94 1499.48 3018.42 1909.09 1750.65 3659.74 1826.57 1865.95 3692.52 1795.58 1739.95 3535.53

MOP 626.22 571.52 1197.74 883.41 845.61 1729.02 464.33 1156.61 1620.94 985.18 1101.56 2086.74

SOP 7.77 3.03 10.8 7.69 7.46 15.15 11.43 4.54 15.97 9.38 8.12 17.5

DAP 1542.67 2081.31 3623.98 2842.73 2529.46 5372.19 2674.78 3153.48 5828.26 3179.18 3756.77 6935.95

• The sale prices of controlled fertilizers are fixed by the Government of India (Department of Agriculture & Cooperation) under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential Commodities Act, 1955.

• The prices notified by the Central Government from time to time have been much lower than the cost of production.

• In addition to the retention price subsidy, equated freight subsidy is paid to the manufacturers of controlled fertilizers to cover the cost of transportation from the production plants to the consumption centres.

• Since the consumer prices of both indigenous and imported urea are fixed uniformly, subsidy is also paid on imported urea in order to bridge the difference between the cost of imports and statutorily fixed consumer price.

• The RPS (Retention Price Scheme) provides for fixation of retention price of individual units on per tonne basis, after taking into account the normative capacity utilisation prescribed under the scheme of the Government and a combination of norms and actuals in respect of the various cost elements and expenses.

Policy• Production• Subsidy and pricing• Imports• Distribution and movements• Selling price and subsidies

A. Controlled Fertilizer : UreaI. Production:• Urea is only fertilizer which is under price,

distribution & movement control through instrument of Fertilizer Control Order (FCO) & Fertilizer Movement (Control) Order (FMCO) under Essential Commodity Act (ECA).

• Fertilizer Production is made under (RPS) administered by Fertilizer Industry Coordination Committee (FICC) which ensures

• - Uniform sale price to farmers

• - Subsidised transportation under Equated Freight Scheme for equitable distribution throughout the country

• - For N-E states & Jammu & Kashmir, transportation costs are paid on actual basis under Special schemes.

• - Reasonable Return (12%) on capital investment to the manufacturers

• II. Subsidy & Pricing • Subsidy • Difference between cost of production of

Urea as assessed by FICC and statutorily fixed sale price paid as subsidy under Retention Price-cum Subsidy Scheme [RPS].

• Difference between cost of imports and the sale price borne as subsidy by Govt.

• RPS started in 1977 with modest provision of Rs. 25 crore. The subsidy bill has since then increased significantly.

• The subsidy for 96-97, 97-98, 98-99 and 1999-2000 (Budgeted) is as under :

Items

Subsidy (Rs. Crore)

(1996-97) (Actual)

(1997-98) (Actual)

(1998-99) (Actual)

(1999-2000) (Budgeted)

Indigenous Urea

4743 6600.00 7572.32 8000.00

Imported Urea

1163 721.96 124.22 750.00

Total 5906 7321.96 7696.54 8750.00

• Price• The price of urea is fixed by the Dept. of

Agriculture & cooperation (DAC) under the Fertilizer (Control) Order, 1985.

• Maximum Retail price of urea is Rs. 4000 per tonne(year:1999-2000); it is the lowest amongst the neighbouring countries.

• III. Imports• The assessment of urea imports is made

periodically by Steering Committee of Secretaries under the Chairman ship of Secretary (Fertilizers).

• Urea is imported on Government Account through canalising agencies (MMTC, STC, IPL) to meet the gap between Demand and Indigenous Availability.

• The deliveries are monitored through an Inter-Ministerial Committee under the Chairmanship of Joint Secretary (Movement).

• It is distributed through nominated handling agencies on open tender basis.

• IV. Distribution and Movement• Supply from plants and ports is arranged by

the Dept. of Fertilizers as per allocation given to Companies and States by the DAC under Essential Commodity Act (ECA).

• To ensure availability in time & space, monthly movement order to each company is issued and monitoring is done on weekly/ fortnightly basis through active interface with:

• - DAC, - Ministry of Railways, - State Governments, - Fertilizer Manufacturers, -Handling Agents at Ports

No. Year Farm Gate Prices

(Rs. / PMT)

1. 1977-78 1550

2. 1978-79 1450 (w.e.f. 10.3.79)

3. 1979-80 1450

4. 1980-81 2000

5. 1981-82 2350 (w.e.f. 11.7.81)

6. 1982-83 2350

7. 1983-84 2150 (w.e.f. 29.6.83)

8. 1984-85 2150

9. 1985-86 2350 (w.e.f. 31.1.86)

10. 1986-87 2350

Selling prices of Urea since 1977:  

11. 1987-88 2350

12. 1988-89 2350

13. 1989-90 2350

14. 1990-91 2350

15. 1991-92 3300 w.e.f. 25.7.91)

3060 (w.e.f. 14.8.91)

16. 1992-93 2760(w.e.f. 25.8.92)

17. 1993-94 2760

18. 1994-95 3320 (w.e.f. 10.6.94)

19. 1995-96 3320

20. 1996-97 3660 (w.e.f. 21.2.97)

21. 1997-98 3660

22. 1998-99 4000 (w.e.f. 29.1.99)

23. 1999-2000 4600(w.e.f29.2.2000)

24. 2000-01 4600

25. 2001-02 4830 (w.e.f 28.2.2002)

26. 2002-03 5070 (w.e.f 1.3.2003)

Subsidy payments to urea units since 1993-94:

Period Amount of subsidy disbursed on

Indigenous urea Imported urea Total

1993-94 3800.00 598.97 4398.97

1994-95 4075.00 1166.00 5241.00

1995-96 4300 1935.00 6235

1996-97 4743 1162.85 5905.85

1997-98 6600 721.96 7321.96

1998-99 7473 124.22 7597.22

1999-2000 8670.00 74.07 8744.07

2000-2001  9480.00 1.00 9481.00

2001-2002

 

8257.00 47.44 8304.44

2002-03(BE) 6499.00 505.00 7004.00

Rs in Crores

Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers

i) Introduction of the Scheme:• The price, distribution and movement of

phosphatic and potassic fertilizers which were under the RPS since November 1977, were decontrolled in August'92 on the recommendations of the Joint Parliamentary Committee on Fertilizer Pricing.

• After decontrol there was a steep hike in prices of P&K fertilizers.

• The Government, apprehending a drop in consumption and to enable availability of decontrolled phosphatic and potassic (P&K) fertilizers at reasonable prices, introduced a Scheme of Concession on sale of decontrolled P&K fertilizers in 1992-93, and announced concession on DAP and MOP.

ii) Evolution of the Scheme:• The scale and coverage of the special concession

has been substantially increased to give impetus to the stagnating demand for these fertilizers and to ameliorate the nutrient imbalance in the soil which is essential for sustaining the desired growth in agricultural productivity. Immediately after the decontrol of phosphatic and potassic fertilizers in August, 1992, the Government announced an adhoc concession (subsidy) of Rs.1000 on DAP and MOP and commensurately on complex fertilizers w.e.f Rabi'92-93.

• In order to improve consumption of phosphatic and potassic fertilizers for improving nutrient balance, Government enhanced the rate of concession on indigenous DAP from Rs.1000 per MT to Rs.3000 per MT and fixed a concession of Rs.1500 per MT for imported DAP in July 1996. Besides, the concession on MOP was also enhanced to Rs.1500 per MT and commensurately on complexes.

Salient Features

• Fixation of MRPs • Computation of Concession • Fertilizers covered • Freight support for transportation of fertilizers to

hilly and inaccessible areas

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