Fert industry for direct payment of subsidy to farmers

The body represnting the fertiliser sector, the FAI (Fertiliser Association of India) on Friday said that fertiliser companies have not made any "windfall gains" in subsidy payments by the government and added that the sector was operating on very low margins. "The Indian fertiliser industry has no vested interest in the subsidy. The industry has been pleading for total decontrol and direct payment of subsidy to the farmers," FAI chairman RG Rajan said.

Echoing similar views, FAI director-general Satish Chander said, "In fact, the operating margins in the industry are very thin compared to any other bulk commodity like cement, steel, etc." Elaborating on his argument, Chander added during 2012-13, on an average, fertiliser firms imported di-ammonium phosphate (DAP) at about USD 580 per tonne and muriate of potash (MoP) at USD 490 per tonne.

"The total delivered cost of DAP worked out to Rs 38,240 per tonne and MoP at Rs 31,106 per tonne, which also includes cost of various components like freight, port charges, wages, and insurance," he said. As against this, the subsidy component is only Rs 14,350 per tonne for DAP and Rs 14,400 per tonne for MoP. The balance amount has to be recovered through the maximum retail price (MRP). "The MRP of DAP was Rs 24,000 per tonne and MoP Rs 16,800 per tonne during the period," Chander added.

"This data will be able give a fair idea to anyone about the margins on which we work and if there are any avenues to draw huge profits," he claimed. Paradeep Phosphates managing director SS Nandurdikar said working margins in the sector were so thin that it was not possible to expect windfall profits.

The total turnover of the industry (excluding the subsidy on imported urea) is about Rs 1,17,000 crore and the total net profit of the whole industry is approximately Rs 2,500 crore for the fertiliser operations," Nandurdikar, who is also co-chairman of FAI, added.

"This net profit is only 2 percent of the total turnover during the financial Year 2011-12 and compares unfavourably with similar other commodities," he said. "The fertiliser industry in its commitment to serve the Indian farmer has been ensuring adequate supply of quality fertilisers in every nook and corner of the country in time over the years, which is a humongous task given the scale and magnitude of the task," he said.