Press Information Bureau

Government of India

Ministry of Chemicals and Fertilizers

23-January-2013 12:00 IST

This is with reference to the reports in a section of the media on undue profit accruing to fertilizer companies under the Nutrient Based Subsidy (NBS) Policy due to fixation of higher MRP by the fertilizer companies.

Reports also suggested that undue profits were also occurred due to excessive imports of fertilizers during Feb-March 2012 when subsidy rates were high.

The issues reported by the media are factually incorrect, baseless, misleading and out of context. It was reported that MoS (Chemicals & Fertilizers) has pointed out above mentioned issues through various internal notes and Department has not taken any action. It is clarified that MOS (C&F) has been regularly discussing these issues with the Departmental officers and the action has been taken by the Department in the best interest of protecting the farmers’ interest as well as Government Subsidies and to ensure that the indigenous fertilizer industry remains competitive and sustainable.

On the specific issue of undue profiteering by the fertilizer companies by fixing higher MRP for phosphatic and potashic fertilizers, it is clarified that under the NBS Policy approved by the Union Cabinet and implemented from 01-04-2010, a fixed amount of subsidy is announced on annual basis for each fertilizer and the companies are free to fix the maximum retail price. While fixing the subsidy, the Government takes into account the prevailing international prices, the exchange rate as well as affordability by the farmers. While doing so, there is complete transparency as the prevailing international prices and the exchange rate are well known. While doing so, all additional costs such as customs duty, countervailing duty, handling charges, dealers’ margin, cost towards secondary transportation, inventory carrying cost, cost of bags etc. incurred by companies are also taken into account. No undue profiteering appears to have been indulged by the fertilizer companies as can be seen from the balance sheets of these companies which are open to public scrutiny as per law.

The next issue relates to the movement of fertilizers during January to March, 2012 and their supplies of P&K fertilizers particularly DAP and NPK was more in comparison to the requirement given by DAC for these months. In this regard it is clarified that the movement of P&K fertilizers during Rabi 2011-12 was done as per the requirement assessed and projected by Department of Agriculture and Cooperation and no excess movement was done during the year 2011-12. The Department has to ensure pre-positioning so that there is no shortage of fertilizers during the peak consumption period. The availability of fertilizers depends on the following factors:-

(i) After the introduction of NBS the subsidy for P&K fertilizers is being fixed annually before the start of the financial year and the companies are entering into long term annual contract with the suppliers of P&K fertilizers to ensure smooth supplies of P&K fertilizers to farmers. The fertilizers for each crop are consumed during a very short window, for example during Kharif most of P&K fertilizers are consumed during the months of May and June and for the Rabi crop, P&K fertilizers are consumed during October and November. Annually India consumes around 60 million tones of all fertilizers and unless the Department takes pro active action to move these fertilizers on daily basis throughout the year, it is impossible logistically to make entire tonnage of 60 million tones available to the farmers during short windows of consumption in each crop season. The main aim of the NBS policy is to bring stability both in terms of prices and availability. During the year of contracting there will be spikes in the prices of various fertilizers and raw materials in the international market. The prices during some months may go up or go down. The NBS policy does not provide for tweaking with the subsidy on month to month basis because of volatility of the prices of the fertilizers and raw materials in international market, fluctuations of exchange rate, availability of fertilizers in the international market and demand of these fertilizers in the domestic market. Actually it takes nearly 3 months from the moment the company contracts the fertilizers to the point when it reaches the farmers.

(ii) The ports are having limited storage capacity. The fertilizers except MOP are required to be stored in covered godown due to its hygroscopic nature. Accordingly, the priority is always given to the fast evacuation of fertilizers from the ports to achieve good turn around. In case the material is not moved fast from the ports it will adversely affect the arrival of fresh material at the ports.

(iii) As already stated earlier that phosphatic fertilizers like DAP and NPK fertilizers are required early in the season to apply as a basal dose at the time of sowing, any restrictions in movement of these fertilizers just before beginning of the season will adversely affect the availability of these fertilizers when required. This situation may also lead to black marketing etc. It is an established fact that adequate availability of fertilizers in the field eliminates the possibilities of black marketing and fertilizers are made available to the farmers at fair market price.

(iv) It is relevant to mention here that ensuring adequate availability of fertilizers by DOF in the States is the top priority. The Cabinet while approving the proposal of DOF for Nutrient based Subsidy (NBS) rates for the year 2012-13 in its meeting held on Ist March, 2012 further ordered that the availability of fertilizers continued to be monitored closely.

(v) The railways are having their own limitations in providing adequate rake for loading fertilizers particularly in peak consumption period. Like consumption, opportunity of having provided rakes once lost cannot be recovered and the movement once lost is lost forever. Ministry of Railways through various meetings and communications to DOF has been insisting not to stop fertilizers movements especially during the lean season.

(vi) The Department of Agriculture and Cooperation has also been consistent in advising the Department of Fertilizers not to stop movement of fertilizers to ensure adequate and timely availability of all fertilizers.

Finally, under the NBS Policy there is no provision of regulating the MRP fixed by the companies. P&K fertilizers are under OGL and hence all the companies are allowed to import fertilizers as per their commercial decisions. Hence, once again, it is reiterated that the news appeared in the channel is baseless, misleading and without verification of any facts.

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Department of Fertilizers, Ministry of Chemicals & Fertilizers, New Delhi

Magha 03, 1934/ January 23, 2013

DNM/NSK/DB