The Hindu Business Line : CoS okays higher subsidy for phosphoric acid

THE Committee of Secretaries (CoS) has approved the Fertiliser Ministry's proposal to accept the increased price of phosphoric acid, as negotiated by the industry with international suppliers, for the purposes of subsidy payment.

As per the proposal approved by the CoS, the Government will have to provide subsidies to complex fertiliser manufacturers, who use phosphoric acid as their input, at a rate commensurate with this year's import price.

This year, fertiliser manufacturers are importing phosphoric acid at a higher price of $ 398 a tonne as compared to $ 356 a tonne paid last year.

This is because a handful of global suppliers of phosphoric acid have raised their prices citing higher input costs this year.

Ministry officials told Business Line that the total impact on this account would be an increase in fertiliser subsidy by more than Rs 600 crore on account of phosphoric acid imports alone.

The Government, according to the officials, was not in a position to delay its decision on this further as di-ammonium phosphate (DAP), the fertiliser made out of this acid, is required in the first phase of sowing in the ensuing rabi season.

The Ministry's proposal, following the CoS's nod, will now be placed before the Minister for Chemicals and Fertilisers and Steel, Mr Ram Vilas Paswan, for his approval during the course of this week.

After the Minister's clearance, the proposal will then be placed before the Cabinet Committee on Economic Affairs (CCEA) for the final approval.

"We expect to place it before the CCEA within the next two weeks," officials said.

Sources in the Ministry said that already there was a scarcity of DAP in the market and the Government had to resort to DAP imports last month at a very high price through MMTC.

This is owing to the fact that all domestic manufacturers have cut down their production on account of the shortage of raw materials.

Even though import of phosphoric acid is continuing, the industry is not sure whether the subsidy will be based on the actual import price this year or on the basis of last year's prices.

This dilemma had forced all the producers to reduce capacity utilisation. This situation, according to the industry, will continue until the proposal for higher subsidy gets a final clearance from the CCEA.