Vajpayee castigated agriculture and fertiliser ministry officials, in a meeting last week, for the "unwarranted" cut in subsidy that had upset production and import plans for these fertilisers, leading to a shortage situation in the country.

The subsidy cut will be reviewed by the Prime Minister later this month. He told food and fertiliser minister SS Barnala to prepare the groundwork for a review.

The flip-flop on subsidy to consumers of potassic and phosphatic fertilisers - of announcing a subsidy level initially for the whole of 1997-98 and reducing it subsequently - has landed the government in a soup and the issue is now under litigation. A review would also be an attempt by thegovernment to pre-empt a court-directed restoration. The confusion arose several months after an announcement in March 1997 of an annual ad-hoc subsidy scheme (from April, 1997 to March, 1998) for DAP - of Rs 3,750 and Rs 2,250 per tonne of domestically-produced and imported DAP respectively, and proportionately on derived complexes. In October, well after producers and importers had finalised their plans for the year on the basis of the March notification, the government announced that a new subsidy scheme was being processed. In the meanwhile, all subsidy grants were suspended.

The impact was devastating: all imports came to a grinding halt and serious shortages of potassic and phosphatic fertilisers were reported from around the country. DAP imports, which were at around 1.5 lakh tonnes in the first half of the last fiscal, dropped to nil in the second half.

But the supply situation notwithstanding, acting on the basis of information that there had been a sharp fall in the international prices ofimported ammonia and phosphoric acid (raw materials that go into the making of DAP and other complexes) as well as of DAP, the government undertook an exercise to cut the ad-hoc subsidy levels.