The Hindu Business Line : Dept of Fertilisers asked to take a fresh look at urea pricing policy

"Now the CoS has asked the Ministry to look at the issues of efficiency, number of groups and what specific improvements could be made with regard to various units."

New Delhi , Aug. 10

The Government's two years' effort since 2004 to prepare a tailor-made policy for the third phase of the new urea pricing scheme that was to become operational from April this year appears to be elusive with the Committee of Secretaries (CoS) asking the Department of Fertilisers to take a fresh look at the draft proposal.

The draft policy for the third phase was sent back by the Cabinet Committee on Economic Affairs (CCEA) in the last week of July and was referred back to the Committee of Secretaries.

CoS plea

The CoS, which met last week, has now asked the Ministry of Fertilisers, Chemicals and Petrochemicals to make specific improvements in the proposal.

Informed sources told Business Line that the committee has observed that the third stage is quite similar to the second and in particular it would amount to continuance of status quo.

"Now the CoS has asked the Ministry to look at the issues of efficiency, number of groups and what specific improvements could be made with regard to various units."

Conversions

Another very specific subject is the conversion of naphtha-based units to gas-based ones.

"The issues are how much time would be needed for conversion of the units and how much time should be given for the conversions. To what extent the time frames can be compressed. The aim would be to give as little time as possible and complete as early as possible," sources said.

The Ministry would now deliberate on the suggestions of the CoS and has been asked to get back to the committee in 15 days, sources said.

Objective

The objective of the new three-staged pricing policy for urea manufacturing units, which came into effect from April 2003, was to bring in greater transparency, uniformity and efficiency in subsidy payments to the fertiliser companies when it was also decided that the modalities for the third stage would be decided after review of the implementation of the first two stages.

In the first two stages, the manufacturing units were divided into six groups based on vintage and feedstock for determining their respective subsidy rates.

The groups were pre-1992 gas-based units, post-1992 gas-based units, pre-1992 naphtha-based units, post-1992 naphtha-based units, fuel oil/low sulphur heavy stock (FO/LSHS) based units and mixed energy based units.

In the existing system, there had been several calculation-related issues last year for units changing over from one to another feedstock for specific periods leading to delays in payments.

The Ministry would also look into this aspect while deciding on changes in the draft that would be sent to the committee, sources said.