A Bonanza: For Phosphatic Fertiliser Importers

Importers of phosphatic fertilisers, especially diammonium phosphate, have reaped a bonanza of Rs.375 crore during 1999-2000 on account of faulty subsidy policy of the Government. In a “new fertiliser scam,” the Government, over the last one year has followed a differential subsidy policy for traders importing DAP over the domestic DAP manufacturers.3

Though international prices are plummeting, Government continued paying subsidies on imported DAP at Rs. 3,300 per tonne . In fact, 15 lakh of the total 33 lakh tonnes of DAP imported came in the first two quarters. The remaining 18 lakh tonnes came in at price as low as $167 per tonne, giving a windfall of Rs.345 crore to DAP importers.

DAP improters were put at an exchange rate of Rs.42.50 to a dollar as compared to domestic manufacturers who paid Rs.42.85 to a dollar for imported raw materials. The “raw of return” fixed on every tonne of DAP produced by manufacturers varied between Rs.19 per tonne and Rs.78 per tonne for various varieties of DAP- the weighted average working out to Rs.56 per tonne. In contrast, the imported DAP carried a rate of return or Rs.130 per tonne, as per Government calculations! The advantage on this account to DAP importers works out to Rs.25 crore.

As a result of the undue advantage given to imported DAP, imports of this fertiliser were at the highest record level of 33 lakh tonnes during 1999-2000 an increase of over 65 per cent over the previous year when during 1998-99, the country had imported 20 lakh tonnes of DAP. In 1997-98 the country and exported 15.36 lakh tonnes of the fertiliser during the entire year. The earlier record was during 1989-90 when DAP imports touched 28.15 lakh tonnes.

The average domestic cost of production of DAP on the present international works out to Rs.12,000 per tonne. The Government has fixed a maximum sale price of Rs.8,300 per tonne for DAP with subsidies being fixed at Rs.4,600 per tonne for the domestic producers and Rs.3,300 per tonne imported DAP.

With a selling price of Rs.8,300 per tonne, the margins for imported DAP work out to Rs.900 per tonne and that for domestic DAP to around Rs. 500 per tonne.

As a result of this differential policy, importers who have not put in any investment  on the ground  get preferential treatment over  domestic manufacturers who have sunk crores by way of investment in the fertiliser projects as well as provide employment to thousands of people. And all this by misusing subsidies which in any case are straining the finances in the economy.

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