Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers Background Introduction of the scheme Evolution of the scheme Implementation by the Central Govt. Transfer of scheme to DOF i) Introduction of the Scheme: The price, distribution and movement of phosphatic and potassic fertilizers which were under the Retention Price cum Subsidy Scheme since November 1977, were decontrolled in August'92 on the recommendations of the Joint Parliamentary Committee on Fertilizer Pricing. After decontrol there was a steep hike in prices of P&K fertilizers. The Government, apprehending a drop in consumption and to enable availability of decontrolled phosphatic and potassic (P&K) fertilizers at reasonable prices, introduced a Scheme of Concession on sale of decontrolled P&K fertilizers in 1992-93, and announced concession on DAP and MOP. [Top ] ii) Evolution of the Scheme: The scale and coverage of the special concession has been substantially increased to give impetus to the stagnating demand for these fertilizers and to ameliorate the nutrient imbalance in the soil which is essential for sustaining the desired growth in agricultural productivity. Immediately after the decontrol of phosphatic and potassic fertilizers in August, 1992, the Government announced an adhoc concession (subsidy) of Rs.1000 on DAP and MOP and commensurately on complex fertilizers w.e.f Rabi'92-93. Respective State/UT Governments indicated the Maximum Retail Prices (MRP). The State/UT Governments disbursed the payment of concession up to 1993-94 from grants-in-aid received from from the Central Government for this purpose. The impact of these rates of concession on increased prices of fertilizers was, however, nullified gradually by the increase in prices of inputs as well as the dollar-rupee parity. In order to improve consumption of phosphatic and potassic fertilizers for improving nutrient balance, Government enhanced the rate of concession on indigenous DAP from Rs.1000 per MT to Rs.3000 per MT and fixed a concession of Rs.1500 per MT for imported DAP in July 1996. Besides, the concession on MOP was also enhanced to Rs.1500 per MT and commensurately on complexes. The scope and method of
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Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers
Background
Introduction of the scheme
Evolution of the scheme
Implementation by the Central Govt.
Transfer of scheme to DOF
i) Introduction of the Scheme:
The price, distribution and movement of phosphatic and potassic fertilizers which were under the Retention Price cum Subsidy Scheme since November 1977, were decontrolled in August'92 on the recommendations of the Joint Parliamentary Committee on Fertilizer Pricing. After decontrol there was a steep hike in prices of P&K fertilizers. The Government, apprehending a drop in consumption and to enable availability of decontrolled phosphatic and potassic (P&K) fertilizers at reasonable prices, introduced a Scheme of Concession on sale of decontrolled P&K fertilizers in 1992-93, and announced concession on DAP and MOP.
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ii) Evolution of the Scheme:
The scale and coverage of the special concession has been substantially increased to give impetus to the stagnating demand for these fertilizers and to ameliorate the nutrient imbalance in the soil which is essential for sustaining the desired growth in agricultural productivity. Immediately after the decontrol of phosphatic and potassic fertilizers in August, 1992, the Government announced an adhoc concession (subsidy) of Rs.1000 on DAP and MOP and commensurately on complex fertilizers w.e.f Rabi'92-93. Respective State/UT Governments indicated the Maximum Retail Prices (MRP). The State/UT Governments disbursed the payment of concession up to 1993-94 from grants-in-aid received from from the Central Government for this purpose. The impact of these rates of concession on increased prices of fertilizers was, however, nullified gradually by the increase in prices of inputs as well as the dollar-rupee parity. In order to improve consumption of phosphatic and potassic fertilizers for improving nutrient balance, Government enhanced the rate of concession on indigenous DAP from Rs.1000 per MT to Rs.3000 per MT and fixed a concession of Rs.1500 per MT for imported DAP in July 1996. Besides, the concession on MOP was also enhanced to Rs.1500 per MT and commensurately on complexes. The scope and method of implementation of the Scheme has been undergoing experience based evolution, which is reflected in revised guidelines being issued by Government of India from time to time.
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iii) Implementation by the Central Government:
There is no unit-wise or importer wise recognition of costs under the Concession Scheme; only industry level average cost of sales is taken into account. Accordingly, concession rate is determined
separately for DAP, MOP and each grade of potassic and phosphatic fertilizer . For each decontrolled fertilizer, the Maximum Retail Price (MRP) is indicated by Central Government except for Single Super Phosphate, the MRP of which is indicated by each State/UT Government Generally, the difference between cost of sales and MRP forms the element of concession.. Payment of 80% 'on account' concession claim (enhanced w.e.f.1.4.2001 to 85% or 90%, if supported by Bank Guarantee applicable to manufacturers of P&K fertilizers only) is made on the basis of sales certified by Statutory Auditors. Imports of DAP/MOP are eligible to claim 80% 'on account payment The balance 20% (15% or 10%) is to be paid after the sales have been certified by the States. In order to avail of concession under the Scheme, the manufacturers/importers are required to sell the decontrolled fertilizers at the applicable MRP. Single window system for preliminary examination of claims has been introduced to expedite payments.
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iv) Transfer of scheme to Department of Fertilizers:
From 1.10.2000, the responsibility of the administration of the Scheme has been transferred from Department of Agriculture & Cooperation to the Department of Fertilizers. Subsequent to transfer of Concession Scheme to Department of Fertilisers sustained efforts are being made to streamline the procedures for implementation of the Scheme. Towards this end national level consultations were held in February 2001 and a one day Workshop was held on Concession Scheme in October 2001 with a view to receive views/suggestions of fertilizer sector in the matter of implementation of the Scheme. A half day conference was also held with Fertilizer Association of India (FAI) and SSP manufacturers on 12.11.02. The above interaction has lad to modification reflected in guidelines for the Concession Scheme issued on 9.10.2000, 17.5.2001 & 5.8.2002. The constitution of Technical Audit & Inspection Cell and specified grades of rock alongwith origin/source of procurement notified for use by SSP industry, are some of the features introduced by the DOF.
Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers
Salient Features
Fixation of MRPs
Computation of Concession
Fertilizers covered
'On-account' and `final' payment of concession
Eligibility for `on-account' & facility of Bank Guarantee
Freight support for transportation of fertilizers to hilly and inaccessible areas
i) Fixation of MRPs:
Under the scheme, maximum retail prices (MRPs) for the fertilizers covered under the scheme are indicated by the Government of India since 1.4.97. However, MRPs for SSP are continued to be fixed by the States. In order to avail of concession under the Scheme, the manufacturers/importers are required to sell the decontrolled fertilizers at the applicable MRP.
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ii) Computation of Concession
The concession rates for decontrolled phosphatic and potassic (P&K) fertilizers are based on the cost price study of DAP (indigenous and imported) and MOP conducted by the then Bureau of Industrial
Costs & Prices (BICP) (now Tariff Commission) in 1998 alongwith the modifications proposed by an Inter Ministerial Group (IMG) consisting of representatives of Department of Agriculture and Cooperation, Department of Expenditure, Department of Fertilizers and Planning Commission. The concession rates for DAP (indigenous and imported) and MOP are arrived at by subtracting the cost of sales from the Maximum Retail Prices (MRPs) indicated under the Concession Scheme. For indigenous DAP, the cost of sales is the sum of the normative industry price (including cost of raw materials, conversion cost and return) and the selling and distribution cost; for imported DAP and MOP, the industry cost of sales includes average C&F cost of imported material, customs duties, selling and distribution cost and reasonable return. The concession rates for complex grade fertilizers have been so far derived from the concession rates of indigenous DAP and MOP proportionate to their nutrient content. The policy of the Government is to maintain a reasonable differential in the rates of concession in favour of indigenous DAP vis-a-vis imported DAP and as the domestic industry faces certain disadvantages in the availability of raw materials used in the manufacture of DAP in the country.
The manufacturers and importers are paid concession (subsidy) to enable them to sell the fertilizers at or below the indicated MRPs. The concession is roughly the difference between the MRP and the industry average cost of production/sales for indigenous DAP; and the MRP and the cost of import/sales for imported DAP. The final rates of concession on indigenous DAP, imported DAP and MOP (correspondingly on complexes) are adjusted on quarterly basis according to fluctuations in the prices of raw materials/intermediates (ammonia and phosphoric acid) and the exchange rate as well as the prices of DAP in the international market.
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iii) Fertilizers Covered:
Phosphatic & Potassic Fertilizers covered under the Concession Scheme are:
Di-Ammonium Phosphate (DAP) (indigenous & imported) Muriate of Potash (MOP) Single Super Phosphate (SSP) NPK Complex Grade Fertilizers:
iv) `On-account' and `final' payment of concession:
The payments made under the Scheme include 'On account' payment of concession claim and balance payment (final settlement of claim). The 'On account' payment is made with reference to applicable base rate and is in the nature of advance payment awaiting settlement of claim which is done after receipt of certification of sales by the concerned State/UT. The manufacturers/importers are also allowed differential payment with reference to base rate and final rate announced for the quarter. The balance payment is made only after the receipt of certification of sales in Proforma 'B' from the concerned State Government based on final concession rate for the applicable quarter of year.
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v) Eligibility for `on account' & facility of Bank Guarantee:
Manufacturers of P&K fertilizers are eligible for 85% 'On account' (upto 90% if supported by a Bank Guarantee) payment of concession, on the quantities of these fertilizers sold for agricultural use or to registered (under FCO) manufacturers of NPK mixture fertilizers. For details on Bank Guarantee facility, the requisite format etc. kindly see Guidelines dated 5.8.02.
Importers notified under the Concession Scheme for P&K fertilizers who have been importing these fertilizers at least for the immediate preceding two years are eligible for 80% `On account' payment. The two year condition for receiving `on account' payment can be relaxed on case to case basis if the importer is willing to offer Bank Guarantee (BG) against an amount equivalent to 100% payment of the claim under the Scheme. Any occasional importer of P&K fertilizers, after induction, is eligible to
receive 100% payment after receipt of certification of sales only.
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vi) Freight support for transportation of fertilizers to hilly and inaccessible areas:
Under the Concession Scheme freight support for transportation of indigenous P & K fertilizers and imported DAP/MOP to hilly and difficult/remote areas was introduced from 1.4.97, intially for Jammu & Kashmir and North East States. From Rabi 1998-99, it has been extended to State of Himachal Pradesh, hilly areas of West Bengal and Uttaranchal. The payment under the Scheme is on actual movement of P & K fertilizers from the declared rake point to the consumption centres. The actual movement of fertilizers by road requires to be certified by the concerned State Government. In case the cost incurred on transportation is lower than the rates notified, the payment is restricted to the actual cost of transportation.
Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers
Special Provisions for SSP
TAC & Use of notified Rock
Grades of Rock Phosphate notified by DOF
i) Technical Audit & Inspection Cell (TAC) & Use of notified grades of Rock Phosphate:
To prevent the production and sale of sub-standard SSP and other malpractice, for being eligible to claim concession, the manufacturers are required to use only the specified grades of rock phosphate notified by Department of Fertilizers (DOF) alongwith origin/source of procurement. Accordingly, a Technical Audit & Inspection Cell (TAC) has been constituted to conduct inspections of SSP manufacturers regarding usage of specified grades of rock phosphate for manufacture of SSP.
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ii) Grades of Rock Phosphate notified by DOF:
1. Primary Rock
RSMML Chips (31.5% P2O5) Imported Jordan Rock (30%) Imported Jordan Rock (32% and above) Imported Jordan Rock (31.6% and above) RSMML Beneficiated Rock (BRP) (33.55% and above) Imported Syrian Rock (29.36% and above) Imported Egyptian Rock (32% and above)
2. Blending Rocks
MPSMC Jhabua A or B Grade (23%) with BRP from RSMML MPSMC Jhabua (25%) with Imported Jordan Rock (31.6%) Lower Grades (with 25%) of MPSMC, RSMML, RSMDC, HZL with BRP from RSMML Lower grades (22-25%) from RSMDC with BRP from RSMML RSMDC (25-27%) with BRP from RSML RSMDC (30%) with BRP from RSMML RSMML (23%) with BRP from RSMML RSMML (25%) with imported Jordan Rock (32%).
SINGLE SUPERPHOSPHATE INDUSTRY - AN OVERVIEW
Single Super Phosphate (SSP) Fertilizer industry is the pioneering fertilizer industry in the country and the first SSP plant is said to have been established by EID Parry in the year 1906. Manufacturing of SSP is based on perhaps the simplest chemical reaction amongst chemical fertilizer industry. The main raw materials required are rock phosphate and sulphuric acid. SSP is a straight phosphatic multi-nutrient fertilizer which contains 16% water soluble P2O5, 12% sulphur, 21% calcium and
some other essential micro nutrients in small proportions. SSP, which is a poor farmer's fertilizer (price-wise), is an option to optimise the use of phosphatic fertilizers. It also helps to treat sulphur deficiency in soils (40% Indian soil sulphur deficient) as well for further enhancement of yields at the least cost. In various crops, which require more of sulphur and phosphate like oilseeds, pulses, sugarcane, fruits and vegetables, tea etc, SSP is an essential fertilizer.
Advantages of SSP Fertilizer:
1. Provides 15% of total phosphate requirement of the country.
2. Lowest price per kg, preferred by small and marginal farmers.
3. Multi-nutrient fertilizer containing P2O5 as primary nutrient and Sulphur and Calcium as secondary nutrients.
4. It is the cheapest source of Sulphur for the soil.
5. Only phosphatic fertilizer which can utilize Indian rock phosphate deposits.
6. Least foreign exchange per unit of P2O5.
7. Utilizes acid effluent from other chemical industry and thus reduces nation's cost of effluent disposal.
After decontrol of fertilizers in August 1992, the Government of India has been implementing Concession Scheme for decontrolled phosphatic and potassic (P&K) fertilizers. SSP is one the decontrolled fertilizers covered under the Scheme. The administration of the Concession Scheme was transferred from Department of Agriculture and Co-operation (DAC) to Department of Fertilizers (DOF) with effect from 1.10. 2000. During the period of administration of the Scheme by DAC, 106 SSP units were listed under the Scheme. In addition, requests from 10 units were under consideration of DAC for induction under the Scheme.
The DOF, with a view to ensuring availability of quality SSP to farmers and in order to minimize possibility of sale of non-standard SSP to farmers, modified the guidelines for the Scheme so as to promote use of specified grades of rock phosphate purchased from notified sources for manufacture of SSP. The Technical Audit and Inspection Cell (TAC) constituted under the Scheme is required to conduct first time and six-monthly inspections of SSP manufacturers for ensuring usage of specified grades of rock phosphate from sources notified by the DOF from time to time. For achieving the underlying objective, the Scheme initially provided for the facility of 80% `On-account' payment to those manufacturers of SSP who used specified grades of rock phosphate. For a more effective control on outgo of concession on sales of SSP as well as availability of quality SSP, under the guidelines issued on 5.8.2002 for being eligible to claim concession on sales of SSP the inspections by Technical Audit and Inspection Cell (TAC) and use grades of rock phosphate notified by the Department of Fertilizers has been made mandatory. As on 1.1.03, total 66 SSP units with an annual installed capacity of around 62.0 lakh MT are eligible to avail of the facility of claiming concession under the Scheme on sales of SSP.
List of companies/units eligible for concession on DAP/MOP/Complexes under Concession Scheme for Decontrolled Fertilizers as on 1.8.02
Manufacturers: Eligible for concession on the indigenous fertilizers shown against the name as also imported quantities of DAP/MOP
S. No.
Name of Company Products
1. Coromandel Fertilisers Ltd Complexes
2. Deepak Fertilisers and Petrochemicals Corp. Complexes
3. EID Parry (India) Ltd, TN Complexes
4. Fertilisers and Chemicals Travancore Ltd Complexes
Importers: eligible for concession on the imported DAP & MOP
18. Chambal Fertilizers & Chemicals Ltd
19. Duncans Industries Ltd.
20. Indian Potash Ltd
21. Minerals & Metals Trading Corporation Ltd
22. Paharpur Cooling Towers
23. Rallis India Ltd.
24. Shriram Fertilisers & Chemicals
25.Tata Chemicals Limited (new company included through letter no.19011/59/2002-MPR dated 21.10.2002.)
Importers: Eligible for claiming "On account" payment against submission of Bank Guarantee
26. Cargill India (P) Ltd
Note: States are requested to continue certification of sales in respect of companies which do not figure in the list but have already filed their claims for sales made up to 31.7.02.
Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers
Basic data on Scheme
Base Rates
Rates of Concession
Maximum Retail Prices (MRPs) of fertilizers covered under the scheme
Pricing
A. Freight Rates
Extra Cost of Transportation of Decontrolled Phosphatic and Potassic (P&K) Fertilizers to North Eastern States including Sikkim, and some areas of J&K from 1.10.2000 to 31.3.2002 and to Himachal Pradesh from 1.10.2000 to 31.3.2001.
SNName of State
Rake point from where the extra road/bridging cost is to be covered
Rates of Transportation Rs./ per MT
1J&K (Weighted Average)
Jammu 795
2 Assam New Guwahati /Jorhat/Dibrugarh/Silchar 100
3Arunachal Pradesh
North Lakhimpur/Jorhat 175
4 Manipur Dimapur 375
5 Meghalaya New Guwahati 175
6 Mizoram Silchar 375
7 Nagaland Dimapur 75
8 Sikkim Siliguri 325
9 Tripura Dharamnagar 375
10Himachal Pradesh
Chandigarh 283
[Top]B. YEAR-WISE RATES OF CONCESSION UNDER THE CONCESSION SCHEME
Rates Of Concession From 1992-93 To 1996-97(Figures in Rs./MT)
Fertilizers 1992-93 1993-94 Up to 5.7.96 6.7.96 to 31.3.97
1. The sale prices of controlled fertilizers are fixed by the Government of India (Department of Agriculture & Cooperation) under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential Commodities Act, 1955. FCO provides that the Central Government may, with a view to regulating equitable distribution of fertilizers and making fertilizers available at fair prices, by notification in the official gazette, fix the maximum prices at which any fertilizer may be sold by a dealer, manufacturer etc. At present, only urea is covered under the statutory price control under these provisions. While the phospahtic and potassic fertilizers were taken out of purview of RPS w.e.f 25.8.1992, the low analysis fertilizers viz., ammonium chloride, ammonium sulphate and calcium ammonium nitrate were decontrolled w.e.f 10.6.1994. From 1.4.2003, RPS will be dismantled and subsidy payments to urea units from 1.4.2003 would be regulated in terms of the new pricing scheme for urea units, which has already been communicated to all urea units on 30.1.2003.2. The prices notified by the Central Government from time to time have been much lower than the cost of production. In order to compensate the manufacturers for lower realisation in the form of statutorily notified sale prices as compared to their retention prices (normative cost of production plus 12% post tax return on net-worth) fixed by the Government, the difference between the retention price of the individual units and their net realisation through their sale price is paid as subsidy by the Central Government to the individual ureamanufacturing units under the Retention Price-cum-Subsidy Scheme (RPS) introduced in November,1977 vide Resolution dated 1.11.1977. The cost of production of various fertilizer units differ from unit to unit and even from month to month, depending upon the health and vintage of the plant, the feedstock used, the levels of capacity utilisation, energy consumption, distance from the source of feedstock / raw materials, cost of inputs etc.3. In addition to the retention price subsidy, equated freight subsidy is paid to the manufacturers of controlled fertilizers to cover the cost of transportation from the production plants to the consumption centres.4. Since the consumer prices of both indigenous and imported urea are fixed uniformly, subsidy is also paid on imported urea in order to bridge the difference between the cost of imports and statutorily fixed consumer price.5. The RPS provides for fixation of retention price of individual units on per tonne basis, after taking into account the normative capacity utilisation prescribed under the scheme of the Government and a combination of norms and actuals in respect of the various cost elements and expenses. Pre-tax return on net-worth corresponding to post tax return of 12% is given as part of the retention price after covering various elements of cost.6. The various cost elements taken into account for fixation of retention price of individual unit fall under the following three broad categories:-
(A) Variable Cost: Comprises of the cost of raw materials and utilities.
(B) Conversion Cost: Comprises of salaries and wages, repairs and maintenance,
selling expenses and other overheads.(C) Capital Related Charges: Comprises of depreciation, interest on loans and 12% post tax return on net-worth. (Networth = equity + free reserves)7. During the currency of a given pricing period of three years, escalations / de-escalations are provided to reflect variations in the prices of major inputs. Escalations are also provided in respect of certain other items of cost (viz. Salaries and wages, chemicals and consumables, repairs and maintenance, overheads etc.) where there is a significant variation during the currency of the pricing period due to unavoidable factors.POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
Formulation of policy parameters for the 7th and 8th pricing periods under RPS:
Under RPS, urea units are compensated for the difference between the statutorily notified sale price and the cost of production as assessed by the Government together with a reasonable return on net-worth, called the retention price. The retention price is fixed unit-wise based on parameters approved for a three year pricing period subject to escalation/de-escalation of cost of inputs during the currency of the pricing period. The 6th Pricing Period was valid up to 30.6.1997.The policy parameters for the period beyond 1.7.1997 - the 7th and 8th pricing periods - have been finalised with the approval of Cabinet Committee on Economic Affairs (CCEA) in its meeting held on 16.5.2002, which has also been communicated to all urea units on 4.6.2002. The 7th Pricing Period will cover the period from 1.7.1997 to 31.3.2000 and the 8th Pricing Period, from 1.4.2000 to 31.3.2003. These are largely in the nature of updating the norms prevailing in the preceding pricing period. However, significant changes have been made with regard to reassessment of plant capacities, withdrawal of vintage allowance, increase in normative levels of capacity utilization and updating the consumption norms.
1. PRICING PERIOD1.1 The duration of the 7th and 8th pricing periods shall be as follows:
7th - from 1.7.1997 to 31.3.2000. 8th - from 1.4.2000 to 31.3.2003 or till a new pricing policy is announced, whichever is
earlier.[Top]2. COSTED YEAR2.1 Costed year for the 7th and 8th pricing periods shall be as follows:
7th - 1.4.1997 to 31.3.1998. 8th - 1.4.1999 to 31.3.2000.
[Top]3. PLANT CAPACITY3.1 An interim revision of the capacities of 16 units was notified by the Department, effective from 1.4.2000. Based on the methodology of Alagh Committee, the capacity of 20 manufacturing units have been revised effective from 1.4.2000. Capacities of the units as on 1.4.2000 are given in Annexure-I.3.2 Department would, however, keep a watch over the changes in the capacity of the individual units in future and take action to notify the revised capacity.POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
4. NORMATIVE LEVELS OF CAPACITY UTILIZATION
4.1 The normative levels of capacity utilization is increased by 5 per cent w.e.f. 1.4.2002.
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5. CONSUMTION NORMS AND PRICING OF INPUTS
Consumption norms for inputs including energy
5.1 For the 7th pricing period, consumption levels achieved by individual units during the financial year 1997-98 (the costed year), or the existing consumption norms applicable for 6th/6th -A pricing period, whichever is lower, shall be adopted.
5.2 For the 8th pricing period, consumption levels achieved by individual units during the financial year 1999-2000 (the costed year) or the consumption norms adopted for 7th pricing period, whichever is lower, shall be adpted.
5.3 In case of units that have carried out revamp during the year 1997-98 (for the 7th pricing period), or during the year 1999-2000 (for the 8th pricing period), operating data of the immediate preceding year shall be adopted for working out the revised norms. In case of units having coal/fuel-oil-based captive power plant (CPP), mix of captive power and purchased power (if any) will be determined considering 80 per cent annual capacity utilization of CPP, which is as per the exiting norms. In case of gas-based units having stand-by/surplus CPP capacity, full usage of CPP will be considered.
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Pricing of Inputs
5.4 Prices prevailing for the quarter July-Sept. 1997 for all the input items shall be adopted for 7th pricing period. Prices prevailing for the quarter April-June 2000 shall be adopted for 8th pricing period. Escalation/de-escalation on input prices shall be allowed during the currency of the respective
6.1 For the 6th and 6th -A pricing periods, it was provided that in respect of major energy saving schemes for ammonia plants installed after commissioning of the original projects, the investment made was recognized immediately in the retention price, whereas the benefits accruing on this account were mopped up after three years from the data of commissioning of the scheme. This policy will continue in the 7th and 8th pricing periods.
6.2 If a unit installs and commissions a specified energy saving device during the currency of a particular pricing period, it would be permitted to retain the benefit of energy savings for the remaining part of three years during the next pricing period.
6.3 Normative energy saving for such units will be derived by FICC keeping in view the actual average/design/test-run energy saving figures furnished by the units, whichever is higher i.e., whichever consumption level is lower.
7. VINTAGE ALLOWANCE7.1 Vintage allowance for capacity utilization and consumption norms shall be as follows:- 5 per cent vintage allowance during 1997-98;- 4 per cent vintage allowance during 1998-99; and- 2 per cent vintage allowance during 1999-2000.
No vintage allowance would be applicable beyond 31.3.2000. The units which are eligible for vintage allowance after 30.6.1997 would be allowed to avail of this allowance till 31.3.2000, as per rate applicable for the other units during the 7th pricing period.[Top]8. CAPITAL ADDITIONS8.1 Capital additions for approved energy saving schemes/devices: Shall be recognized as stated in para 6.8.2 Revamp/modernization schemes/projects: During the 6th & 6th -A pricing periods, revamp/modernization schemes/projects involving change in capacity and/or consumption norms were recognized in the retention price, along with the concomitant change in capacity and/or consumption norms, from the data of commissioning of the scheme project. This principle shall be continued in the 7th and 8th pricing periods also.8.3 Revamp projects for sick companies: In respect of sick urea companies, DOF/FICC took a decision in February 2000 to recognize, w.e.f. 1.4.1991, the net capital additions made under approved revamp/revival/modernization schemes/projects on commissioning of specific devices, on yearly basis. However, the revision of consumption/capacity norms is made effective on commissioning of the entire revamp/modernization schemes/projects. This special dispensation was aimed at improving the cash flow with a view to help the process of rehabilitation of such units. This principle adopted during the 6th and 6th -A pricing periods would continue in the 7th and 8th pricing periods.[Top]8.4 Normal Capital Additions: Normal capital additions are taken to mean all expenditure other than those covered under items 8.1, 8.2 and 8.3 and are recognized for the retention price provided these are not included in the repairs and maintenance claims. For calculating capital related charges for the 7th pricing period, normal capital additions made up to 30.6.1997 will be considered. Likewise, for calculating the capital related charges for the 8th pricing period, normal capital additions up to 31.3.2000 shall be considered.8.5 Foreign exchange fluctuation: Capital additions on account of foreign exchange variation after 1.4.1997 shall be considered wherever applicable during the 7th and 8th pricing periods.
POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
9. SALARIES AND WAGES9.1 Actual incidence of salaries and wages comprising pay, DA, HRA, CCA and CPF only during the costed year 1997-98 for the 7th pricing period and during the costed year 1999-2000 for the 8th pricing period shall be considered. Escalation of 5 per cent per annum will be allowed on cumulative basis for incidence of annual increments, DA, etc. If and when salaries and wages are revised based on the tripartite agreement during the pricing period, necessary escalation thereupon shall be allowed. The number of employees shall be restricted to the level of the
costed year 1997-98 or 1999-2000, as the case may be, or the 5th pricing period level, whichever is less. Escalation in respect of this item for private sector companies shall be restricted to the weighted average level of PSUs or actual, whichever is lower.[Top]10. CONTRACT LABOUR10.1 Contract Labour rates prevailing as on 1.7.1997 for 7th pricing period and as on 1.4.2000 for the 8th pricing period shall be allowed with no provision for escalation.11. CHEMICALS AND CONSUMABLES11.1 Prices as on 1.7.1997 for 7th pricing period and as on 1.4.2000 for the 8th pricing period and quantity as in 1997-98 for 7th pricing period and as in 1999-2000 for the 8th pricing period shall be adopted. Of this total expenditure, 40 per cent will be considered as fixed cost and remaining 60 per cent, as variable cost adjusted to normative level of production. No escalation will be provided during the respective pricing periods.[Top]12. CATALYSTS12.1 Life of Catalysts: The life of catalysts shall be adopted as per the following figures for computing the life of catalysts in different stage of a plant:
Type of catalysts
Normative life of catalysts for the7th and 8th pricing periods
(in months)
Coal-based plant
Naphtha-based plant
Gas-based plant
Primary Reformer Nil 24 42
Secondary Reformer Nil 42 42
HT Shift Converter 42 42 42
LT Shift Converter Nil 42 42
Methanation Nil 66 66
Ammonia Synthesis 108 108 108
12.2 Price and quantity of catalysts: Prices as on 1.7.1997 for 7th pricing period and as on 1.4.2000 for the 8th pricing period and quantity charged during 1997-98 for 7th pricing period and during 1999-2000 for the 8th pricing period shall be allowed. No escalation shall be allowed during the respective pricing periods.[Top]13. REPAIRS AND MAINTENANCE13.1 Expenditure on repairs and maintenance shall be allowed on the basis of three years' moving average viz. the year under consideration and two immediately preceding years. While doing so, claims in respect of all items above Rs. 5 lakh would be subjected to closer scrutiny before recognition.14. OVERHEADS AND INSURANCE14.1 Administrative and social overheads of the costed year 1997-98 for 7th pricing period and of the costed year 1999-2000 for 8th pricing period shall be considered. Items that are not directly related to cost such as insurance premium for loss of profit, charities and donations, discounts, bad debts and income/expenditure relating to past period would not be considered. Insurance rates as on 1.4.1997 for 7th pricing period and as on 1.4.2000 for 8th pricing period shall be adopted for insured value of costed year. No escalation during the pricing period shall be allowed.[Top]15. MISCELLANEOUS RECEIPTS15.1 For the 7th and 8th pricing periods, miscellaneous receipts for the costed year shall be arrived at by taking the average of the last three years immediately preceding the respective pricing periods and deducted from the conversion cost.[Top]16. PACKING MATERIAL16.1 The consumption norm for bags would remain as 20.1 bags of 50 Kg. Capacity each, per MT of urea for the 7th and 8th pricing periods. Initial computation shall be done as per the Gunny Bags Traders Association (GTA) Index as at the beginning of the pricing period, followed by annual reviews. Quarterly adjustments on the basis of actual usage of jute/HDPE bags on weighted
average basis subject to the maximum price as per GTA Index shall be allowed. While reimbursing cost to urea units on packing material, FICC would ensure that the variation in the cost bags between units is kept to the minimum extent possible, preferably within a range of 5per cent.[Top]17. DEPRECIATION17.1 The overall depreciation rate would continue to be 6.33 per cent for the total assets of a plant, depreciating the original value over 15 years with a residual salvage value of 5 per cent.[Top]18. CAPITAL EMPLOYED18.1 For 7th pricing, net fixed assets as on 1.7.1997 and for 8th pricing period, as on 1.4.2000, would be considered. The working capital would be determined on the basis of inventory norms as well as the input prices determined for the quarter July-September, 1997 for 7th pricing period and for the quarter April-June, 2000 for the 8th pricing period. The same priority for the return as followed in the 6th and 6th -A pricing periods shall be continued, namely:(i) The whole of equity capital(ii) Long term loans that have gone into the financing of the fixed assets;(iii) Free reserves;(iv) Short-term loans; and(v) Cash credit[Top]19. CAPITAL WORKS-IN-PROGRESS19.1 Capital works-in-progress shall be recognized for the purposes of CRC (including for depreciation and return) after they are completed and commissioned but only from the next pricing period. For instance, if a capital work-in-progress is completed and commissioned during the 7th pricing period, it will be considered for CRC purposes (including for depreciation and return) only during the 8th pricing period. Same principle would remain applicable for the 8th pricing period.[Top]20. RETURN ON NET WORTH20.1 Post-tax return on the net-worth, which comprises equity and free reserves for the urea activity only, under the exiting system of priority on the balance outstanding as on 30.6.1997 for the 7th pricing period, and as on 31.3.2000 for the 8th pricing period, would be considered at 12 per cent.20.2 In respect of new grass-roots and expansion units (wherever final/provisional/ad-hoc retention price has been notified), the free reserves would be treated as equity from the date of commercial production.20.3 The method of calculation of return on net-worth on the basis of notional tax liability subject to adjustment of actual rate of corporate tax notified by the Government on year to year basis and at the rate of return of 12 per cent shall continue for the 7th and 8th pricing periods. Should there be a change in the method in favour of adoption of actual tax in place of notional tax, the same shall be adopted as and when decided upon.
POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
21. INTEREST ON BORROWINGS
21.1 For 7th pricing period, the weighted average interest rate for the costed year 1997-98 on long-term loans, short-term loans and debentures as on 31.3.1997 would be adopted. In respect of cash credit, the rate for each urea unit during the costed year 1997-98 shall be adopted. Should there be any variation in the rate of interest on the cash credit during the currency of the pricing period, necessary adjustments will be carried out in the retention price annually.21.2 For 8th pricing period, the weighted average interest rate for the costed year 1999-2000 on long-term loans, short-term loans and debentures outstanding as on 31.3.2000 shall be adopted. In respect of cash credit, the rate for each urea unit during the costed year 1999-2000 shall be adopted. Should there be any variation in the rate of interest on the cash credit during the currency of the pricing period, necessary adjustments will be carried out in the retention price annually.[Top]22. BONUS22.1 Expenditure on account of bonus shall be recognized @ 8.33 per cent with reference to the actual expenditure as during the costed year 1997-98 for 7th pricing period and as during the costed year 1999-2000 for 8th pricing period.
[Top]23. SELLING EXPENSES23.1 Actual selling expenses would be reimbursed after verification subject to a ceilling of Rs. 110/MT for 7th pricing period and Rs. 138/MT for 8th pricing period.[Top]24. EQUATED FREIGHT24.1 Primary Freight, i.e. from plant-gate to warehouse/field godowns: Rates of primary freight shall continue to be updated every financial year by FICC taking into consideration the ECA allocations, rail freight rates, rail/road mix etc., during the 7th and 8th pricing periods.24.2 Secondary Freight, i.e. from warehouse/field godowns to block headquarters: Rates of secondary freight would be revised for every pricing period (for 7th and 8th pricing periods) by collecting data for leads adopted as well as average road transport rates for different States, broadly following the same principles as for the primary freight. Details will be worked out and notified by the FICC.24.3 Special freight subsidy for North-Eastern States and Jammu and Kashmir: Despatches made to the North-Eastern States (except Assam) and Jammu and Kashmir would continue to be governed by the Special Freight Reimbursement Schemes introduced in 1997 outside the equated freight system (see Annexure II & III).POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
25. REIMBURSEMENT OF SPECIFIC STATE TAXES25.1 The existing policy of not recognizing the expenditure incurred by the urea units on certain specific state levies, shall be continued. The exiting policy of reimbursing sales tax and surcharge on sales tax, octroi, local development tax, entry tax, excise duty, etc. as decided by FICC shall continue for 7th and 8th pricing periods.[Top]26. OTHER (RESIDUARY) PARAMETERS26.1 In addition to the above-mentioned parameters, some residuary parameters are also considered in determination of capital related charges. These include interest concession on the loans taken to procure the capital equipments for revamp/modernization/expansion, pre-operative and start-up expenses, technical know-how expenses, etc. The norms for such residuary parameters have traditionally been determined either by the FICC or wherever necessary by the Department of Fertilizers in consultation with the Department of Expenditure. These arrangements shall continue during the 7th and 8th pricing periods. Further, in respect of such pricing parameters where standard accounting principles are followed, suitable decisions shall continue to be taken by FICC as is being done now.
[Top]ANNEXURE-IPLANT CAPACITIES AS ON 1.4.2000
S.NO. Name of the UnitsAnnual Capacity of Urea(Lakh MTs per annum)
No. 18/17/97-FMGOVERNMENT OF INDIAMINISTRY OF CHEMICALS & FERTILIZERS(DEPARTMENT OF FERTILIZERS)
KRISHI BHAWAN, NEW DELHI - 110 001.Dated : the 21st October, 1997
ORDERSubject : SPECIAL FREIGHT REIMBURSEMENT SCHEME FOR THE PURPOSE OF TRANSPORTATION OF FERTILIZERS TO CERTAIN NORTH-EASTERN STATES.
In the context of the special problems affecting the movement of urea in the North-Eastern States, it has been decided to introduce with effect from 1.4.1997, a Special Freight Reimbursement Scheme for the transportation of urea in the North-Eastern States with a view to ensuring the adequacy and timeliness of this critical fertilizer to the farmers.2. The salient features of the scheme are as under:[Top]SCOPE OF THE SCHEMEI) This Scheme shall be in lieu of Equated Freight Scheme and shall be applicable to North-Eastern States of Arunachal Pradesh, Mizoram, Meghalaya, Manipur, Nagaland, Tripura and Sikkim.II) It shall be applicable in respect of the supply of urea to the above-mentioned States by indigenous manufacturers and pool handling agencies for imported urea.[Top]METHODOLOGYa) The supply of urea to the said States shall be predominantly from Namrup unit of Hindustan Fertilizer Corporation Ltd. (HFC). In respect of supplies from sources other than HFC, Namrup, freight on actual reimbursement basis will be admissible on ex-
Guwahati/ex-Dimapur basis.b) The reimbursement of freight for urea supply shall be admissible as primary freight up to the nodal points from Namrup by rail or road or both, as indicated in respect of each of the Stated. States-wise nodal points as well as the mode of movement shall be as under:-
NAME OF THE STATE
NODAL POINT MODE OF MOVEMET
1 2 3
I. SUPPLY SOURCE : NAMRUP
Arunachal Pradesh Khonsa All movements by road
Bombdila
Passighat
Manipur Dimapur-Imphal
Namrup-Dimapur; By rail
Dimapur-Imphal; By road
Nagaland Dimapur Namrup-Dimapur; By rail
Mizoram Aizwal Namrup-Guwahati; By rail
Guwahati-Aizwal; By road
Meghalaya Guwahati Namrup-Guwahati; By rail
Shillong Guwahati-Shillong; By road
Tripura Guwahati Namrup-Guwahati; By rail
Agartala Guwahati-Agartala; By road
Sikkim Siliguri Namrup to Silliguri; By rail
Gangatok Siliguri-Gangatok; By road
OTHER SOURCESImported Urea
Haldia Haldia-Karimganj; By Inland Waterways route
Agartala Karimganj-Agartala;By road
POLICY PARAMETERS FOR THE 7TH AND 8TH PRICING PERIODS
(a) For the movement of urea from Namrup up to rake point by rail, the reimbursement of freight under the scheme shall be limited to the sum of the actual freight rate(s) as notified by the Ministry of Railways and the rate of reimbursement for transportation undertaken by road between the factory and/or rake point and nodal point as determined by the implementing agency.In case the transportation of urea is undertaken by waterways from Haldia to Karimganj, the reimbursement shall be on the basis of the rate notified by the implementing agency.(b) The movement beyond the nodal points will be covered under secondary freight at the rates notified by Government of India from time to time in respect of each State.[Top]IMPLEMENTING AGENCYThe Fertilizer Industry Coordination Committee (FICC) shall be the authorized agency for implementation of the scheme. It shall evolve the requisite procedures for release of payments under the Scheme, including the procedure for certification of the actual expenditure.
This issues with the concurrence of the Ministry of Finance vide UO No.69(10)/PF-II/97 dated 1.10.1997.
Sd/-(K.K. JASWAL)JOINT SECRETARY TO THE GOVT. OF INDIATele : 3381294Copy to :1. Finance Division, Department of Fertilizers.2. Principal Director of Audit, Economics & Service Ministries, AGCR Building, New Delhi.3. Controller of Accounts, Department of Fertilizers.4. Director (Fertilizer Accounts), Department of Fertilizers.5. Pay & Accounts Officer, Department of Fertilizers.6. Secretary, Department of Agriculture, Government of Sikkim, Nagaland, Manipur, Arunachal Pradesh, Mizoram, Meghalaya & Tripura.7. Chairman-cum-Managing Director, Hindustan Fertilizers Corporation Ltd., New Delhi.8. Executive Director, FICC, New Delhi.9. Guard File.
Retentation Price Cum Subsidy On Urea
New pricing policy for urea units:1. Given the importance of fertilizer pricing and subsidisation in the overall policy environment impinging on the growth and development of the fertilizer industry as well as well of agriculture, the need for streamlining these policies has been felt for a long time. A High Powered Fertilizer Pricing Policy Review Committee (HPC) was constituted to review the existing system of subsidization of urea, suggest an alternative broad-based, scientific and transparent methodology, and recommend measures for greater cohesiveness in the policies applicable to different segments of the industry. The HPC, which submitted its report to the Government on 3rd April 1998 has, inter-alia, recommended that unit-wise RPS for urea may be discontinued. It has recommended that instead of unit-wise RPS, a uniform Normative Referral Price (NRP) be fixed for existing gas based urea units and also for DAP. A Feedstock Differential Cost Reimbursement (FDCR) be given for a period of five years for urea units.2. Expenditure Reforms Commission (ERC) headed by Shri K.P. Geethakrishnan had also examined the issue of rationalizing fertilizer subsidies. The Commission submitted its report on 20th September 2000. ERC has recommended inter-alia, dismantling of existing RPS and in its place introduction of a Concession Scheme for urea units based on feedstock used and the vintage of plants in respect of gas based units.3. The Department of Fertilizers has examined the recommendations of ERC in consultation with the concerned Ministries/Departments. The Department has also obtained the views of the fertilizer industry and the State Governments/Union territories, Ministry of Agriculture and economists/research institutes on the ERC report. A new pricing policy keeping in view the recommendations of Expenditure Reforms
Commission for replacing the existing RPS has been approved by the Government on 19.12.2002. The new pricing scheme will come into existence w.e.f 1.4.2003. A letter giving the salient features and modalities for implementation of new scheme has also been issued to all urea units on 30.1.2003. The new policy aims at greater transparency, uniformity and efficiency in disbursements of subsidy payments to urea units and will induce them to take cost reduction measures on their own and be competitive.Contents of DOF’s letter dated 30.1.2003 containing salient features and modalities of implementation of new pricing scheme for urea units:
No. 12019/5/98-FPP
Government of India
Ministry of Chemicals & Fertilizers
Department of Fertilizers
…
Shastri Bhawan, New Delhi.
January 30, 2003
To,
The Executive Director,
Fertilizer Industry Coordination Committee,
8th Floor, Sewa Bhawan,
R.K. Puram,
New Delhi.
Subject: Pricing policy for urea manufacturing units
Madam,
I am directed to say that the Government have approved a new pricing policy for urea
units which will replace the existing Retention Price Scheme and will come into effect from
1.4.2003.Salient features of the policy as also the modalities for implementation of the Scheme
are as follows: 1. The primary consideration and goal of the new pricing policy is to encourage efficiency parameters of international standards based on the usage of the most efficient feedstock, state-of-art technology and also ensure viable rate of return to the units.The new scheme will come into effect from 1.4.2003 and will be implemented in stages.Stage-I would be of one year duration, from 1.4.2003 to 31.3.2004.Stage-II would be of two years duration, from 1.4.2004 to 31.3.2006.The modalities of Stage-III would be decided by the Department of Fertilizers (DOF) after review of the implementation of Stage-I and Stage-II.
2. There will be six groups based on vintage and feedstock for determining the group based concession under the new Scheme, namely, pre-1992 gas based units, post-1992 gas based units, pre-1992 naphtha based units, post-1992 naphtha based units, fuel oil/low sulphur heavy stock (FO/LSHS) based units and mixed energy based units.The mixed energy based group shall include such gas-based units that use alternative feedstock/fuel to the extent of more than 25% as admissible on 1.4.2002. Classification of units among different groups so determined shall remain unchanged during Stages-I and II.Retentation Price Cum Subsidy On Urea
3.During Stage-I, following measures would be put into effect:3.1. Ratesof concession for the units in each group to be determined in two steps. In Step-I, the weighted average retention price and the dealer’s margin of the units in the respective group as applicable on 1.4.2002 would be computed.Units having exceptionally high or low retention price, i.e. deviation of 20% and above with reference to group average computed in Step-I are to be treated as outliers in their respective groups.In Step-2, the final weighted average group retention price after excluding the outliers will be computed.3.2. The group concession rate on 1.4.2003 would be computed on the data of the
units on 31.3.2003 as applicable.To determine that, the retention prices as notified for the half year up to 30.9.2002 would be taken as the base and the adjustment on the basis of 8th pricing period for the remaining period, i.e. 1.10.2002 to 31.3.2003, shall be made before the end of financial year 2003-2004.3.3. Effective 1.4.2003, the units in each group would receive the concession after adjustment on account of escalation/de-escalation in the variable cost related to changes in the price of feedstock, fuel, purchased power and water. The modalities for this purpose will be worked out by DOF for Stage-I and Stage-II on the basis of group energy data and efficient consumption patterns of the units keeping in view the data of 8th pricing period.3.4.Thoseunits which have lower retention price than the weighted group average (estimated after excluding the outliers as final group retention price) are to get the concession as per their individual retention price.The remaining units (excluding outliers) are to get the concession based upon the weighted group average retention price computed after excluding the outliers. This basis would be valid for Stage-II also.3.5. After commencement of Stage-I and also beyond Stage-II, there shall neither be any reimbursement of the investment made by a unit for improvement in operations nor any mopping up of gains of the units as a result of operational efficiency. The parameters outlined in the new scheme shall be the inputs for computation of concession.3.6. The outliers having a retention price higher than 20% or more from the group average in their respective group would be granted an adjustment phase of one year, i.e. Stage-I.During Stage-I, such outliers will get a rate of concession based upon the group weighted average (after excluding outliers) and a structural adjustment which will be 50% of the difference between their respective retention price and the group average computed as Step-II mentioned in para 3.1.3.7. Group concession rates will be calculated excluding the incidence of sales tax on inputs which will be computed and compensated on the basis of rates effective on 1.4.2002 for each unit. However, the compensation would be proportionately reduced if the rates are reduced by any State. 4.During Stage-II, i.e. from 1.4.2004, the following measures shall be put into effect :4.1.There will be no special treatment for the outliers and all the units will get the group rate of concession as outlined earlier for Stage-I.The units having lower concession rate than the group average shall continue to get the concession as per their individual concession rate. The six groups would remain as in Stage-I.4.2. The concession rates shall be adjusted for reduction in capital related charges.Further, the group energy norms would be enforced on efficiency considerations.The Department of Fertilizers would take into consideration the recommendations of the Gokak Committee in determining the group energy norms.The scale of reduction on account of capital related charges (CRC) would also be finalized by the Department of Fertilizers.Thus, the adjustments on account of CRC and group energy norms effective in Stage-II would be made known to the units so that they have reasonable time for making necessary technological and other structural adjustments. 5. Under the new Scheme, there will be no capping on production of urea. The use or sale of by-products such as ammonia, CO2etc. will be permitted in case considered surplus beyond the reassessed capacity for urea production. The final concession would be determined on the reassessed installed capacity. The additional production beyond the installed capacity would receive concession if it is mopped up under the ECA allocation. The feedstock/fuel ratio for the entire production would be taken into consideration for assessing the concession.
Retentation Price Cum Subsidy On Urea
6.Phased decontrol of urea distribution/movement6.1. In Stage-I, i.e. from 1.4.2003 to 31.3.2004, the allocation of urea under the Essential Commodities Act 1955 (ECA) will be restricted up to 75% and 50% of installed capacity (as reassessed) of each unit in Kharif 2003 and Rabi 2003-04, respectively.The Department will be free to make necessary adjustments in determining ECA allocation in case the estimated/actual production during the year is below the reassessed installed capacity.The remaining urea production will be available to the manufacturers for sale to the farmers at
MRP anywhere in the country.Manufacturers will be entitled to sell urea to complex manufacturing units on the principle of import parity price or to export, with the condition that no subsidy/concession will be payable on that quantity and it will be computed towards the quantity permitted for decontrolled sale. The DOF will reserve the authority to make suitable adjustments, in view of demand-supply positions in the ECA allocation, and de-controlled urea up to 15% over and above the reassessed installed capacity in case their applicable concession rate is financially and economically efficient thereby contributing to reduce the subsidy burden. During Stage-II, urea distribution will be totally decontrolled after having evaluated the Stage-I and with the concurrence of the Ministry of Agriculture. 7. Freight7.1. During 2003-04, equated freight will be worked out for the urea quantity under ECA allocation on the basis of average normative lead and rail-road mix of each unit for the last three years i.e. 2000-01, 2001-02 and 2002-03. Suitable adjustments will be granted in the event of rail freight revision during the course of 2003-04. Secondary freight will remain the same as fixed for the 8th pricing period. For the quantity outside ECA allocation, a reduction of Rs. 100 PMT will be made from the equated freight. The same levels of payment will be made in Stage-II as well. Regarding the road component of the primary freight, appropriate adjustments will be made as per annual increase/decrease in the Wholesale Price Index of diesel in the previous year for the fuel part and indices of other components will remain unchanged in the composite index. 7.2. The existing scheme for special freight subsidy will continue for supplies to the NorthEastern States and Jammu & Kashmir. The Government will also have the right to issue special movement order under the EC Act as per the demand supply situation, particularly for difficult and remote areas.
8. This Department has separately written to the Chief Executives of urea manufacturing companies requesting them to convey their participation in the new pricing scheme by executing an undertaking in the prescribed proforma.
Yours faithfully,
-sd(Sudhir Krishna)
Joint Secretary to the Government of India
Retentation Price Cum Subsidy On Urea
A. Controlled Fertilizer : UreaI. Production:
Urea is only fertilizer which is under price, distribution & movement control through instrument of Fertilizer Control Order (FCO) & Fertilizer Movement (Control) Order (FMCO) under Essential Commodity Act (ECA).
Fertilizer Production is made under Retention Price-cum-Subsidy Scheme (RPS) administered by Fertilizer Industry Coordination Committee (FICC) which ensures :
- Uniform sale price to farmers- Subsidised transportation under Equated Freight Scheme for equitable distribution throughout the country- For N-E states & Jammu & Kashmir, transportation costs are paid on actual basis under Special schemes.- Reasonable Return (12%) on capital investment to the manufacturers[Top]II. Subsidy & PricingSubsidy
Difference between cost of production of Urea as assessed by FICC [known as retention price] and statutorily fixed sale price paid as subsidy under Retention Price-cum Subsidy Scheme [RPS].
Difference between cost of imports and the sale price borne as subsidy by Govt. RPS started in 1977 with modest provision of Rs. 25 crore. The subsidy bill has since
then increased significantly. The subsidy for 96-97, 97-98, 98-99 and 1999-2000 (Budgeted) is as under :
The price of urea is fixed by the Deptt. of Agriculture & cooperation (DAC) under the Fertilizer (Control) Order, 1985.
Maximum Retail price of urea is Rs. 4000 per tonne; it is the lowest amongst the neighbouring countries.
[Top]III. Imports
The assessment of urea imports is made periodically by Steering Committee of Secretaries under the Chairman ship of Secretary (Fertilizers).
Urea is imported on Government Account through canalising agencies (MMTC, STC, IPL) to meet the gap between Demand and Indigenous Availability.
The deliveries are monitored through an Inter-Ministerial Committee under the Chairmanship of Joint Secretary (Movement).
It is distributed through nominated handling agencies on open tender basis.[Top]IV. Distribution and Movement
Supply from plants and ports is arranged by the Deptt. of Fertilizers as per allocation given to Companies and States by the DAC under Essential Commodity Act (ECA).
To ensure availability in time & space, monthly movement order to each company is issued and monitoring is done on weekly/ fortnightly basis through active interface with:
- DAC - Ministry of Railways - State Governments - Fertilizer Manufacturers - Handling Agents at Ports
OUR VISION:- Provision of inputs in terms of inorganic and organic fertilizers with a view to achieve sustainable growth in agriculture sector. - Reasonable and optimum level of self sufficiency in domestic production of fertilizers. - Promotion of judicious mix of chemical fertilizers usage in terms of availability and affordable prices of inputs. - Easy availability of bio-fertilizer for extension of organic farming in the country. OUR CLIENT:- Public Sector Undertakings, Multi-State Cooperative Societies and Private Companies in Fertilizer Sector.- Farmers and Citizens with grievances. OUR ACTIVITY: - Medium and Long Term Fertilizer Policy. - Planning for fertilizer production domestically and imports of controlled fertilizer.
- Allocation and supply linkage for movement and distribution of urea to all the States in terms of assessment made by the Department of Agriculture and Cooperation. - Administration of financial concessions/support for controlled and decontrolled fertilizers including periodic revision in retention price for urea, concession rate for decontrolled fertilizers; besides, costing and pricing of such fertilizers. - Administration of the Fertilizers (Movement Control) Order, 1973. - Planning, production and the usage of bio-fertilizer, micro-nutrient and organic manure/municipal waste in the country. - Administrative responsibility of public enterprises and Cooperative Sector Undertakings of the fertilizer sector. OUR COMMITMENTS:- Strutctural reforms in the fertilizer sector including technological upgradation to make it efficient and price competitive by international standards within the broad framework of available feedstock and other raw materials.- Making available fertilizers to farmers at the door steps on affordable prices.- Promote balanced application of main fertilizer nutrients.A. CONTROLLED FERTILIZER : UREAi. Production- Urea is the only fertilizer which is under price, distribution & movement control through instrumentality of Fertilizer Control Order (FCO) & Fertilizer Movement (Control) Order under Essential Commodities Act (ECA).- Production and subsidy disbursement is regulated under Retention Price Scheme (RPS) administered by Fertilizer Industry Coordination Committee (FICC).- To make fertilizers available at affordable price throughout the country, a uniform Maximum Retail Price (MRP) are fixed for farmers(exclusive of the central sales tax, the state tax and other local taxes wherever levied).- Subsidised transportation under Equated Freight Scheme for equitable distribution throughout the country.- For North-Eastern States and Jammu & Kashmir, transportation cost of fertilizers is paid on actual basis under Special Freight Scheme.- The price of urea is notified by the Department of Agriculture & Cooperation (DAC) under the Fertilizer (Control) Order, 1985.- Maximum Retail price of urea is currently Rs. 4830 per MT w.e.f. 28.2.2002.ii. Imports- The assessment of urea imports is made periodically by Steering Committee of Secretaries under the chairmanship of Secretary (Fertilizers).iii. Distribution and Movement- Urea supply from manufacturing units and ports is arranged by the Department of Fertilizers as per allocations given to urea companies and monitoring of availability is done as per demand as per demand assessed by the State on weekly / fortnightly basis through active interface with State Government under Essential Commodity Act (ECA).- Department of Agriculture & Cooperation- State Governments- Fertilizer Manufacturers- Handling Agents at Ports.B. DE-CONTROLLED FERTILIZERSi. Production, Imports & Distribution- No control on production & distribution.- Imports are decanalised.- There is no distribution control over decontrolled N&P fertilizers. However, from North-East, Jammu & Kashmir, Himachal Pradesh and hilly areas of Uttranchal and West Bengal, transportation cost ex rail-head to various destinations is being reimbursed under Special Freight Scheme.ii. Pricing and Concession- To cushion the impact of decontrol on the prices, the Government introduced a scheme of concession sales of these decontrolled fertilizer. The Department of Fertilizers has been administering concession scheme w.e.f. October, 2000.- Indicative MRPs and Concession rates are fixed by government of India from time to time. For example, MRPs of decontrolled P&K fertilizers effective 28.2.2002 are:
MRP(Rs.) Indigenous DAP 9350 Imported DAP 9350 MOP 4455 Complexes 6980-9080 In case of Single Super Phosphate (SSP), MRPs are fixed by respective State Governments. C. OUR INVESTMENT/ INCENTIVES
To encourage investment in the fertilizer sector, the following concessions are available:- No license is required for setting up/expansion of fertilizer plants. Entrepreneurs are free to set up/expand fertilizer projects anywhere in the country subject to environmental clearance.- Concessional customs duty benefit on import of capital goods for setting up of new plants/substantial expansion/renovation/modernisation of existing units.- Deemed export benefits to indigenous supplies of capital goods to new/revamped/retrofit/modernisation of fertilizer projects.GRIEVANCES REDRESSAL MECHANISM: This Department is committed and ever alert to redress grievances in a responsible and effective manner. The silent measures are:- A Grievances Cell has been set up in the office of Shri Ram Vilas Paswan, Minister for (Chemicals & Fertilizers and Steel) for any complaints / suggestions relating to availability, quality, price etc. of fertilizers. The Citizens are free to lodge complaint / suggestion at toll free help line No. 1600-114400.- Joint Secretary (Administration) functions as Joint Secretary (Public Grievances) in order to ensure expeditious redressal of grievances. On every Wednesday between 10.00 A.M. and 1.00 P.M., the public can meet the Grievance Officer with regard to their grievances and complaints (Tele No.. 2338481, Room No. 111-B Wing, Shastri Bhawan, New Delhi).GENERAL- The Citizens’ Charter will be reviewed annually for further improving our response to the public.- The information with regard to our programmes and activities can be accessed in our website. (Address: http://fert.nic.in)- The information is also provided through publications which are available through the Information and Facilitation Centre., Near Gate No. 3 Shastri Bhawan, New Delhi (Tele No. 23384317). The Counter open from 9 : 00 A.M. to 5 : 30 P.M from Monday to Friday.RIGHT OF THE PUBLIC Specifications about quality control for all the fertilizers are provided under Schedule I, Part-A of Fertilizer Control Order (FCO), 1985 which can be accessed from website www.agricoop.nic.in/sublegifert.htm.In case of complaints regarding substandard sale of fertilizers and sale of fertilizers at higher price than MRP or inadequate availability any other violation of provisions of Fertilizer Control Order, 1985 any citizen can approach local office of Agriculture Department/Directorate of Agriculture or District Administration for redressing the same. All the citizens have the right to approach the office of Joint Secretary (A&M), Department of Fertilizers for registering such complaints.CONTACT POINTS:- The address and phone numbers of the contact points are as under:1. Joint Secretary (A&M) 111-B, Shastri Bhavan, New Delhi-110001 Tel: 3388481(O). E-mail:2. Grievance Cell, Office of the Minister (Chemicals & Fertilizers), Room No. 308-B, Shastri Bhavan, New DelhiHelp Line No. 1600-114400,Fax No. 23388321
