The Hindu : Phased decontrol of fertilizers

Online edition of India's National Newspaper
Friday, Jul 12, 2002

Business

Business

Phased decontrol of fertilizers

By Our Special Correspondent

NEW DELHI JULY 11. The Government proposes to achieve a phased decontrol of the fertilizer industry, establish a sustainable pricing policy and deal with the closure and rehabilitation of sick and unviable fertilizer units.

This was disclosed here today by the Chemicals and Fertilizers Minister, S. S. Dhindsa, while addressing a meeting of the Parliamentary Consultative Ministry attached to his Ministry.

Mr. Dhindsa told members that the Government was in the process of formulating a long term pricing policy for urea units based on the recommendations of the Expenditure Reforms Commission.

The Commission has recommended replacement of unit-wise retention price scheme with the group concession scheme. At present, he said, the matter was being considered by the Group of Ministers.

Mr. Dhindsa said the policy parameters for the seventh and eighth pricing periods beyond July 1, 1997 have been finalised. The seventh pricing period will go from July 1, 1997 to March 31, 2000 and the eighth pricing period from April 1, 2000 to March 31, 2003.

Regarding the current scenario for the industry, he said it was witnessing a phase of uncertainty in some critical issues like pricing policy for urea, decontrol of phosphatic and potassic fertilizers and the issue of unviable and sick PSEs as well as disinvestment.

There was a need to restructure and revamp the fertilizer industry to prepare it to meet the challenges of global competition. He said the production strategy of increasing chemical fertilizers output during the Tenth Plan would be determined by the impending pricing policy for urea, firm availability of LNG in the context of dwindling supply of domestic natural gas and pricing of LNG affecting the viability of the project and the impact of import liberalisation.

The Minister pointed out that the retention price scheme and concession scheme for decontrolled fertilizers were imposing a heavy financial burden.

The Government had thus come under increasing pressure to curtail expenditure on subsidy and concessions extended to the fertilizer industry.

As a result, he said it had recently re-assessed the capacity of urea units, tightened the consumption norms and increased the level of capacity utilisation for computing retention price for urea units.

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