STATEMENT TO BE MADE BY SHRI SURESH P. PRABHU, MINISTER FOR CHEMICALS AND FERTILIZERS IN LOK SABHA ON 16.5.2000 IN RESPONSE TO CALLING ATTENTION NOTICE TABLED BY S/SHRI BASUDEB ACHARIA AND LAKSHMAN SETH, MPs REGARDING SITUATION ARISING OUT OF CLOSURE OF SOME UNITS OF HINDUSTAN FERTILIZERS CORPORATION AND FERTILIZER CORPORATION OF INDIA AND NON-RECOVERY OF THE SUBSIDY OVERDRAWN BY CERTAIN FERTILIZER COMPANIES AND STEPS TAKEN BY THE GOVERNMENT IN REGARD THERETO.

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 Sir,

        The Hon'ble Members have raised two matters of public importance, one concerning the situation arising out of closure of some of the units of Hindustan Fertilizer Corporation Ltd. and Fertilizer Corporation of India Ltd. and the other regarding the non-recovery of the subsidy overdrawn by certain fertilizer companies. I wish to clarify the position with regard to both these issues.

    In so far as the Hindustan Fertilizer Corporation Ltd. and Fertilizer Corporation of India Ltd. are concerned, both these companies have been declared sick industrial companies by the Board for Industrial and Financial Reconstruction(BIFR). HFC has units at Durgapur, Barauni and Namrup. In addition, it has a unique Haldia Fertilizer Project which was mechanically completed in November 1979 but due to a variety of equipment related problems, obsolete technology and other reasons could never be commissioned. Government had to order suspension of commissioning activities in October 1986. Almost similar is the status of FCI which has units at Sindri (Bihar), Gorakhpur (Uttar Pradesh), Ramagundam (Andhra Pradesh) and Talcher (Orissa). HFC has only one functional unit at Namrup while Sindri is the only functional unit of FCI. Government have taken a decision to revamp the Namrup Project of HFC at an estimated investment of Rs.350 crore and have also sanctioned necessary budgetary provisions accordingly. Government has been regularly providing adequate budget for regular renewal and replacement of Sindri unit of FCI which has achieved a record production of over three lakh tonnes this year because of this. The Government of India have already decided to hive off the Haldia unit of HFC. A decision in respect of the other units of the two companies was deferred. The matter will be placed before the Government at the earliest for a decision. It may also be appropriate to mention here that KRIBHCO's proposal for availing itself of the infrastructure available at Gorakhpur for installing a new plant is also under Government's consideration. Government's policies with regard to sick public sector undertakings have been clearly enunciated as that of revival of techno-economically viable units, closure of unviable units, while taking full care of the interest of the workers.

    Now I come to the second issue. Understatement of capacity by some of the urea producing units was first referred to in the report of the Joint Parliamentary Committee (JPC) on Fertilizer Pricing of August 1992. Thereafter, this matter has been deliberated at various levels in the Government. The High Powered Fertilizer Pricing Policy Review Committee(HPC) which was headed by Prof. C.H. Hanumantha Rao has also referred to it in some detail. The FICC had very recently considered the report of the Expert Committee constituted by it to examine various aspects of the matter. The Standing Committee on Petroleum and Chemicals had expressed its serious views on the matter and recommended that penal action against the defaulting companies be considered.

    The question of understatement of capacity has two aspects, one relating to initiating penal action and the other relating to recovery of the excess amount drawn as subsidy. In so far as penal action is concerned, it has been decided to refer the matter to the CBI for necessary investigations. In so far as recovery of the excess amount drawn as subsidy is concerned, it has been decided to constitute a Committee headed by Dr. Y.K. Alagh, an eminent Economist with a view to determining the amounts recoverable from the defaulting companies. Its advice will be obtained on the various aspects of the report submitted by the Expert Committee which was discussed by the FICC recently. While the action referred to above in both these respects pertain to the past, the Government also propose to take remedial action through a new Fertilizer Pricing Policy which is at an advanced stage of preparation. Pending finalisation of the new fertilizer pricing policy and the receipt of the report of the aforesaid Dr. Alagh Committee, FICC has been directed to take such corrective measures as would result in minimising the overdrawal. Due care will be taken in the new fertilizer policy to ensure that such unintended benefits do not accrue to the industry without in any way affecting indigenous production of urea on a sustained basis with proper returns. Such an approach is necessary to ensure availability of adequate quantity of fertilizers to the Indian farmers at affordable prices and also ensuring continued flow of investment in the sector.