The Hindu Business Line : Make realistic assessment of fertiliser subsidy: FAI

PEEVED with the series of delayed decisions by the Centre on increasing the fertiliser subsidy allotment for the current year, that led to production cuts across most fertiliser units in the country earlier this year, the Fertiliser Association of India (FAI) in its pre-Budget memorandum of 2005-06 has made it clear that "as long as fertilisers are under pricing and distribution control and companies are not free to charge market determined prices, the Government must allocate adequate funds for fertiliser subsidy based on realistic assessment."

"The Budget provision for 2005-06 must be based on realistic assessment taking into consideration the backlog of the previous year, if any," the FAI states in its memorandum.

It may be mentioned that the fertiliser subsidy Bill for the current fiscal would be close to around Rs 18,000 crore against Budget provision of around Rs 13,000 crore because of increased international prices of vital inputs such as sulphur, phosphorus and muriate of potash and the Government failed to take timely decision because of the elections.

The FAI has urged the Government to withdraw customs duty on crucial inputs such as ammonia, phosphoric acid, imported sulphuric acid for fertiliser manufacture, rock phosphate and sulphur.

It has also asked for withdrawal of basic customs duty on LNG, which is currently pegged at 5 per cent, as well as withdrawal of customs duties on fertiliser project imports and spare parts.

As of now the effective duty rate for project imports and spare parts works out to be 22.6 per cent and 40.4 per cent respectively.

In its memorandum submitted to the Finance Minister, the fertiliser body has also pleaded for reduction on service tax on the fertiliser industry from the existing level of 10 per cent to five per cent.

The FAI has also urged the Government for an exemption from the general recommendations of the Kelkar task force regarding Central and State sales taxes on materials used as inputs for fertiliser manufacture.

On the changes proposed by the Kelkar task force on Fiscal Responsibility and Budget Management Act 2003, the FAI have stated that, "the recommendations to remove exemptions/concessions allowed in levy of Central and State level taxes should not be implemented so far as fertilisers and inputs used in their manufacture are concerned.

"Basic raw materials such as natural gas, LNG, naphtha, fuel oil, LSHS etc should not be subjected to higher rates of Central-general sales tax, as has been suggested as a general recommendation for petroleum crude and products and natural gas, when such materials are used for fertiliser manufacture."