Central Government Departments

Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers

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Concession Scheme for Decontrolled Phosphatic & Potassic Fertilizers

Background

i. Introduction of the scheme

ii. Evolution of the scheme

iii. Implementation by the Central Govt.

iv. 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.

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.

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.

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.

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