Friday, November 18, 2011

MK Alagiri red flag on Urea Decontrol-wages war with Pranab Mukherjee

18 Nov 2011                 



From R Rajagopalan

NEW DELHI: A turf war has intensified between Finance Minister Pranab Mukherjee and Chemicals and Fertiliser Minister M K Alagiri on the decontrol of all fertiliser prices. Mukherjee wants to reduce his subsidy bill. Alagiri has, however, sought the Prime Minister's intervention to scuttle an imminent decontrol of urea as he worried taht it will badly hit the small and marginal farmers.

He has pointed out in a letter to the Prime Minister that the new policy of a partial decontrol of some fertilisers since April 1 last year rather shot up its subsidy bill and their prices doubled without giving more choices to the farmers as envisaged in the policy despite his strong protests.

Mukherjee, as chairman of the Group of Ministers (GoMs) on fertilisers, has been shooting down repeated pleas of Alagiri since February last year on the nutrient based subsidy (NBS) policy that was implemented from April 1 last year. Alagiri had feverishly fought for postponing the policy by at least one year or let Department of Fertilisers implement it in phases.

Sharing the concern over the burgeoning fertiliser subsidy, Alagiri has been taking the stand that any direct cut in the subsidy budget is no solution. Instead, he suggested to enter into long term contracts at reasonable rates and establish joint ventures in the resource-rich countries to source fertilisers.

In a terse note to the Prime Minister, Alagiri has opposed the next move to decontrol urea that was left out from the 2010 policy enforced on the phosphatic and potassic fertilisers known as NPK, pointing out the disaster of allowing the manufacturers and importers, instead of the government, fix the MRP (Maximum Retail Price) of these fertilisers.

He points out that his prophesy in his two letters last year to the finance minister on February 3 and 13 has come true as the fertiliser prices are shooting up and "subsidy bill of the government in NPK sector is also growing incessantly." He is worried that after introduction of the NBS policy, the MRP of fertilisers has rather doubled "which is going against the interest of the farmers as well as food security of the country."

Alagiri had also protested in his February 13 letter last year to Mukherjee to desist from any direct cut in the fertiliser subsidy budget as it would "definitely result in scarcity of fertilisers, which would not only cause farmers' riots but also in reduced overall food grains production." His concern was that "any direct cut in fertiliser subsidy would result in multifold increase in subsidy on imports of food grains."

Mukherjee has, however, remained adamant that the policy has been carefully worked out, keeping in mind all these factors, and hence no scope for any revision. In his letter on February 12, 2010, he also rejected Alagiri's plea in his letter of February 3 that year not to hike the urea price by 10 per cent, pointing out that its MRP has remained unchanged since the year 2002, leading to its excessive use detrimental to the health of the soil as "an unduly low MRP insulates the user from market realities, resulting in unrealistic demand for the product."

In his separate letters dated August 3 this year to both the Prime Minister and Mukherjee, Alagiri has warned that any decontrol of urea "may have significant impact on the availability of urea at affordable prices in different parts of the country and aggravate the situation with respect to small and marginal farmers" as it is the most sensitive and widely used fertiliser in the country.

He has taken a firm stand that "for next 2-3 years any suggestion of implementing Nutrient Based Subsidy (NBS) regime in heterogeneous urea industry alongwith proposals regarding decontrol of MRP and decanalisation of urea imports is not desirable."

Alagiri points out how impractical the government was to decontrol the prices of NPK fertilisers from April 1 last year, wanting a written assurance from the fertiliser industry to maintain current price line. The Department of Fertiliser did work on getting such assurance, but there was hardly any credible assurance from the industry.

The fertiliser minister says it was impractical for the industry to give such a written assurance, "given the highly volatile nature of prices of fertilisers in the international markets and the fertilisers proposed to be covered in the 2010 NBS are mainly dependent on imports up to 90 per cent." There have also been instances when the price rise has been three to four times in international market over a period of six months, he points out.

Moreover, he said the government can not bind the existing players in the industry as the NPK fertilisers fell under decontrolled category and these are also on OGL (open general licence) which means any new entity can import and sell these fertilisers to farmers and claim the concession and subsidy envisaged in the NBS.


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