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February 23, 2001                                       Feedback  

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Government likely to abolish RPS on fertilizers: Survey


The Government is likely to abolish the Retention Price Scheme(RPS), introduced in 1977 to sustain the indigenous fertilizer industry in production, to bring about ''uniformity and transparency'' in the disbursement of subsidy to manufacturers and also to encourage units to undertake cost reduction measures.

Indicating this, the Economic Survey 2000-2001 said recommendations of High-Powered Fertilizer Policy Review Committee and Expenditure Reforms Commission will be taken into account for framing the policy for the fertilizer sector to achieve a deregulating regime in all three types of fertilizers- nitrogen, phosphatic and potassic- as a long-term goal.

The Commission has been categorical in its recommendations that to sustain the unviable urea units' in production at a higher cost.

The RPS system should be done away with as it consumed a major share of fertilizer subsidy.

Besides, some units were found resorting to excess realisation of the subsidy by manupulating their capacity- production ratios, known as 'goldplating'.

The Survey points out that on an average the Government is bearing a subsidy of more than Rs 4000 per tonne of urea, still a controlled commodity, to sell it to farmers at a fixed price of Rs 4600 per tonne excluding local levies.

Thus the subsidy on Nitrogenous fertilizer alone in 2000-01 is estimated at Rs 85.58 billion.

Under the concession scheme, applicable to Phosphatic and Potassic fertilizers, which were decontrolled in August, 1992, the budgetary subsidy was fixed at Rs 40.93 billion.

The total subsidy going to the fertilizer sector will be Rs 126.51 billion in 2000-01.

The consumption of fertilizer (NPK) has been steadily increasing over the years. In nutrient terms, the fertilizer consumption rose from 5.5 million tonnes in 1980-81 to 18.07 million tonnes in 1999-2000.

However, the ideal consumption of NPK in the ratio of 4:2:1 has underwent serious distortion of 6.4:2.7:1 as in 2000-01 effecting the soil fertility, the survey said.

Referring to the production, the Survey said the indigenous production of nearly 14.3 million tonnes of nitrogenous and phosphatic fertilizers (N and P) in 1999-2000 fell short of consumption by more than 12.8 per cent.

In 2000-01, the production of N and P is expected to increase to 15.25 million tonnes (11.21 million tonnes of nitrogen and 4.04 million tonnes of phosphate). In case of potash, the entire requirement is being met from imports, the survey said.


Economic Survey 2000-2001
Budget 2001

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