Fertiliser importers reap Rs 375-cr bonanza

Fertiliser importers reap Rs 375-cr bonanza
NAVIKA KUMAR

MAY 1: 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 what is being termed as a ``new fertiliser scam'' in fertiliser circles, the government, over the last one year has followed a differential subsidy policy for traders importing DAP over the domestic DAP manufacturers.

The government continued paying subsidies on imported DAP at the rate of Rs 3,300 per tonne even though international prices of DAP plummeted from $ 212 per tonne (fob) between April to June 1999 to $ 209 per tonne between July to September, to $ 199 between October and December and $ 167 between January and March 2000. In fact, 15 lakh of the total 33 lakh tonnes of DAP imported during 1999-2000 came in the first two quarters. The remaining 18 lakh tonnes came in at prices as low as $ 167 per tonne, giving a windfall gain of Rs 345 crore to DAP importers.

If this was not enough, DAP importers 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 like rock phosphate and sulphuric acid. Not only this, the `rate 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 works out to Rs 56 per tonne. In contrast, the imported DAP carried a rate of return of 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 had 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 prices of raw materials works out to Rs 12,000 per tonne. On the other hand, average cost of imported fertilisers including freight etc is around 10,500 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 for 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.