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Phosphatic and Potassic (P&K) Policy

Concession scheme/nutrient based subsidy policy for decontrolled Phosphatic & potassic fertilizers

Government of India decontrolled Phosphatic and Potassic (P&K) fertilizers with effect from 25th August 1992 on the recommendations of Joint Parliamentary Committee. Consequent upon the decontrol, the prices of the Phosphatic & Potassic fertilizers registered a sharp increase in the market, which exercised an adverse impact on the demand and consumption of the same. It led to an imbalance in the usage of the nutrients of N, P & K (Nitrogen, Phosphate and Potash) and the productivity of the soil. Keeping in view the adverse impact of the decontrol of the P&K fertilizers, Department of Agriculture & Cooperation introduced Concession Scheme for decontrolled Phosphatic & Potassic (P&K) fertilizers on ad-hoc basis w.e.f. 1.10.1992, which has been allowed to continue by the Government of India upto 31.3.2010 with changed parameters from time to time. Then the Government introduced Nutrient Based Subsidy Policy w.e.f. 1.4.2010 (w.e.f. 1.5.2010 for SSP) in continuation of the erstwhile Concession Scheme for decontrolled P & K fertilizers.

The basic purpose of the Concession Scheme and Nutrient Based Subsidy Policy has been to provide fertilizers to the farmers at the subsidized prices. Initially, the ad-hoc Concession Scheme was introduced for subsidy on DAP, MOP, NPK Complex fertilizers. This scheme was also extended to SSP from 1993-94. Concession was disbursed to the manufacturers/importers by the State Governments during 1992-93 and 1993-94 based on the grants provided by Department of Agriculture & Cooperation. Subsequently, DAC started releasing payment of concession to the fertilizer companies based on the certificate of sales issued by the State Governments on 100% basis.

The Government introduced the system of releasing 80% 'On Account' payment of concession in 1997-98 to the fertilizer companies month-wise, which was finally settled based on the certificate of sales issued by the State Government. During 1997-98, Department of Agriculture & Cooperation also started indicating an all India uniform Maximum Retail Price (MRP) for DAP/NPK/MOP. The responsibility of indicating MRP in respect of SSP rested with the State Governments. The Special Freight Subsidy Reimbursement Scheme was also introduced in 1997 for supply of fertilizers in the difficult areas of J&K and North-eastern States, which continued upto 31.3.2008. Based on the cost price study of DAP and MOP conducted by Bureau of Industrial Costs & Prices (BICP - now called Tariff Commission), Department of Agriculture & Cooperation started announcing rates of concession based on the cost plus approach on quarterly basis w.e.f. 1.4.1999. The total delivered cost of fertilizers being invariably higher than the MRP indicated by the Government, the difference in the delivered price of fertilizers at the farm gate and the MRP was compensated by the Government as subsidy to the manufacturers/importers for selling the fertilizers at the MRP indicated by the Government.

The administration of the scheme was transferred from Department of Agriculture & Cooperation to Department of Fertilizers w.e.f. 1.10.2000. The Government introduced a new methodology for working out subsidy to complex fertilizers w.e.f. 1.4.2002 based on the recommendations of the Tariff Commission. The complex manufacturers were divided into groups based on feedstock for sourcing Nitrogen, such as gas, naphtha, imported ammonia. With the passage of time, the structure of DAP industry also changed as some of the new DAP manufacturing plants were established using the Rock Phosphate for manufacturing indigenous Phosphoric acid/DAP. Accordingly, the Tariff Commission made a fresh Cost Price Study and submitted its report in February 2003. Payment of concession to the DAP manufacturing units from 2003-04 to 2007-08 was made as per two groups depending upon the source of the raw materials (Rock Phosphate/ Phosphoric acid). Based on the decisions of the Government in 2004-05, Department of Fertilizers framed a proposal suggesting methodology to link phosphoric acid price with international DAP price. Subsequently, the matter was referred to the Expert Group. The Expert Group under Prof. Abhijit Sen, submitted its report in October 2005.

The recommendations of the Expert Group were considered by an Inter-Ministerial Group (IMG). Tariff Commission conducted fresh cost price study of DAP/MOP and NPK complexes and submitted its report in December 2007. Based on the examination of the Tariff Commission Report and the longterm approach suggested by the Expert Group under the Chairmanship of Prof. Abhijit Sen, the Government approved the Concession Scheme with effect from 1.4.2008 for DAP/MOP/NPK Complexes/ MAP, which continued upto 31.3.2010 with certain modifications. The final rates of concession were worked out on monthly basis. Concession for indigenous DAP was the same as that of imported DAP (on the basis of import parity price). Concession on complex fertilizers was based on the methodology recommended by Tariff Commission with certain modifications.

The NPK complex industry was divided into 4 groups, depending upon the source of Nitrogen, gas, naphtha, imported Urea-ammonia mixture and imported Ammonia. A separate cost of 'S' for Sulphur containing complex fertilizers was recognized w.e.f. 1.4.2008. The input/fertilizer prices for Concession Scheme was derived on the basis of an outlier methodology. The Buffer Stocking Scheme was allowed to continue with 3.5 Lakh MTs for DAP and 1 Lakh MTs for MOP as buffer. Modifications in certain elements of the Concession Scheme were also carried out with effect from 1.4.2009 to adjust parameters of concession scheme to International pricing dynamics and rationalize 'N' pricing group-wise as well as payment system. Certain changes were effected in the existing policy for P &K Fertilizers. Accordingly, w.e.f. 1.4.2009 final rates of concession were worked out on monthly basis, taking into account the average international price of the month preceding the last month or the actual weighted average C&F landed price at the Indian ports for the current month, whichever lower with respect to DAP and MOP. In case of raw materials/ inputs for complex fertilizers, there was a lag of one month. From 1.12.2008, payment of concession has been made to the manufacturers/importers of the Decontrolled fertilizers (except SSP) on the basis of arrival/ receipt of fertilizers and certificate of receipt by the State Government/statutory auditor of the company subject to final settlement on the basis of sale of the quantity.

The MRPs of the P&K fertilizers, which has been indicated by the Government/State Government, has been constant since 2002 till 31.3.2010. The MRPs of the NPK complexes were reduced w.e.f. 18.6.2008. In order to enhance the basket of fertilizers in the Concession Scheme, Mono- Ammonium Phosphate (MAP) was included into the Concession Scheme w.e.f. 1.4.2007, Triple Super Phosphate (TSP) was inducted into the Concession Scheme w.e.f. 1.4.2008 and Ammonium Sulphate (AS) manufactured by M/s FACT and M/s GSFC was inducted w.e.f. 1.7.2008.

 

(A) Nutrient Based Subsidy Policy for decontrolled Phosphatic & Potassic fertilizers

In the implementation of Concession Scheme, it has been experienced that no investment has taken place in last decade. The subsidy outgo increased exponentially by 530% during 2004 to 2009 with about 90% of the increase due to rise in the international prices of fertilizers and inputs. Agricultural productivity did not register increase in commensurate with the increase in the subsidy bill. The MRP of the fertilizers remained constant from 2002 onwards. A Group of Ministers (GoM) constituted to look into all aspects of the fertilizer regime, recommended that Nutrient Based Subsidy (NBS) may be introduced based on the contents of the nutrients in the subsidized fertilizers. The Hon'ble Finance Minister in its Budget Speech 2009 announced for introduction of Nutrient Based Subsidy Policy for Phosphatic & Potassic fertilizers with the objective of ensuring Nation's food security, improving agricultural productivity and ensuring the balanced application of fertilizers. The Government introduced the Nutrient Based Subsidy (NBS) Policy w.e.f. 1.4.2010 in continuation of the erstwhile Concession Scheme for decontrolled P & K fertilizers (w.e.f. 1.5.2010 for SSP). The details of Nutrient Based Subsidy Policy are as under:

  • NBS is applicable for Di Ammonium Phosphate (DAP, 18-46-0), Muriate of Potash (MOP), Mono Ammonium Phosphate (MAP, 11-52-0), Triple Super Phosphate (TSP, 0-46-0), 12 grades of complex fertilizers and Ammonium Sulphate (AS - (Caprolactum grade by GSFC and FACT), which were covered under the earlier Concession Scheme for Phosphatic and Potassic (P&K) fertilizers up to 31st March 2010 and Single Super Phosphate (SSP). Primary nutrients, namely Nitrogen 'N', Phosphate 'P' and Potash 'K' and nutrient Sulphur 'S' contained in the fertilizers mentioned above are eligible for NBS.
  • Any variant of the fertilizers mentioned above with secondary and micro-nutrients (except Sulphur 'S'), as provided for under FCO, is also eligible for subsidy. The secondary and micro-nutrients (except 'S') in such fertilizers attracts a separate per tonne subsidy to encourage their application along with primary nutrients.
  • An Inter-Ministerial Committee (IMC) has been constituted with Secretary (Fertilizers) as Chairperson and Joint Secretary level representatives of Department of Agriculture & Cooperation (DAC), Department of Expenditure (DOE), NITI Aayog and Department of Agricultural Research and Education (DARE). This Committee recommends per nutrient subsidy for 'N', 'P', 'K' and 'S' before the start of the financial year for decision by the Government (Department of Fertilizers). The IMC also recommends a per tonne additional subsidy on fortified subsidized fertilizers carrying secondary (other than 'S') and micro-nutrients. The Committee considers and recommends inclusion of new fertilizers under the subsidy regime based on application of manufacturers/ importers and its need appraisal by the Indian Council for Agricultural Research (ICAR), for decision by the Government.
  • NBS to be paid annually on each nutrient namely, 'N', 'P', 'K' and 'S' has been decided by the Government for 2010-11 on recommendation of IMC. For 2010-11, per kg NBS and per tonne NBS for each subsidized fertilizer w.e.f 1st April 2010 has been announced.
  • Distribution and movement of fertilizers along with import of finished fertilizers, fertilizer inputs and production by indigenous units continues to be monitored through the on-line web based "Fertilizer Monitoring System (FMS)" as being done under the outgoing Concession Scheme for P&K fertilizers.
  • 20% of the price decontrolled fertilizers produced/imported in India is now in the movement control under the Essential Commodities Act 1955 (ECA). Department of Fertilizers will regulate the movement of these fertilizers to bridge the supplies in under-served areas.
  • In addition to NBS, freight for the movement and distribution of the decontrolled fertilizers by rail and road is being provided to enable wider availability of fertilizers in the country.
  • Import of all the subsidized P&K fertilizers, including 13 grades of complex fertilizers has been placed under Open General License (OGL). Earlier, no concession was available for imported complex fertilizers. Now, NBS is available for imported complex fertilizers also. However, subsidy will not be applicable on imported Ammonium Sulphate (AS), as NBS is applicable only to Ammonium Sulphate produced by FACT and GSFC.
  • Though the market price of subsidized fertilizers, except Urea is determined based on demand-supply balance, the fertilizer companies are required to print Maximum Retail Price (MRP) along with applicable subsidy on the fertilizer bags clearly. Any sale above the printed net MRP is punishable under the EC Act.
  • Manufacturers of customized fertilizers and mixture fertilizers are eligible to source subsidized fertilizers from the manufacturers/ importers after their receipt in the districts as inputs for manufacturing customized fertilizers and mixture fertilizers for agricultural purpose. There is no separate subsidy on sale of customized fertilizers and mixture fertilizers.
  • A separate additional subsidy is provided to the indigenous manufacturers producing complex fertilizers using Naphtha based captive Ammonia to compensate for the higher cost of production of 'N'. However, this will be for a maximum period of two years from 01.04.2010 during which the units will have to convert to gas or use imported Ammonia. The quantum of additional subsidy will be finalized by Department of Fertilizers in consultation with DOE, based on study and recommendations by the Tariff Commission.
  • The NBS is being released through the industry during the first phase. The payment of NBS to the manufacturers/ importers of DAP/MOP/Complex Fertilizers/ MAP/TSP, SSP and AS is released as per the procedure notified by the Department.

 

 

 

 

(B) Nutrient Based Subsidy Per Kilo Gram of Nutrients

Based on the recommendations of the Inter Ministerial Committee constituted under the Nutrient Based Subsidy Policy, the Government has allowed the per Kg NBS for 'N', 'P', 'K' & 'S' (Nitrogen, Phosphate, Potash and Sulphur) and the amount of subsidy per MT on the Phosphatic & Potassic fertilizers for 2010-11 to 2017-18 is as follows:

 Per Kg NBS rates fornutrients N, P, K, S for the 2010-11 to 2017-18:                                                        

NBS rates (Rs. per Kg)

 

 

 

Nutrients

1st  Apr - 31st  Dec 2010 *

1st  Jan- 31st  Mar 2011**

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

‘N’ (Nitrogen)

23.227

23.227

27.153

24.000

20.875

20.875

20.875

15.854

18.989

‘P’ (Phosphate)

26.276

25.624

32.338

21.804

18.679

18.679

18.679

13.241

11.997

‘K’ (Potash)

24.487

23.987

26.756

24.000

18.833

15.500

15.500

15.470

12.395

‘S’ (Sulphur)

1.784

1.784

1.677

1.677

1.677

1.677

1.677

2.044

2.240

 

*Including Rs. 300/- per MT for secondary freight from rake point to retail points.

** Excluding the secondary freight of Rs. 300/- PMT, which was being paid separately on per ton per Km basis.

(C) The per MT Nutrient Based Subsidy during 2010-11 to 2017-18 is as follows:

NBS rates from 2010-11 to 2017-18 (Rs. per MT)

 

 

 

Sl. No.

Fertilizer Grades(FG)

2010-11

2011-12

2012-13

2013-14

2014-15

 

 

2015-16

 

 

(N P K S nutrient)

1.4.2010 to 31.12.2010

1.1.2011 to 31.3.2011

2016-17

2017-18

1

DAP (18-46-0-0)

16268

15968

19763

14350

12350

12350

12350

8945

8937

2

MAP  (11-52-0)

16219

15897

19803

13978

12009

12009

12009

8629

8327

3

TSP    (0-46-0-0)

12087

11787

14875

10030

8592

8592

8592

6091

5519

4

MOP  (0-0-60-0)

14692

14392

16054

14400

11300

9300

9300

9282

7437

5

SSP (0-16-0-11)

4400

4296+200

5359

3676

3173

3173

3173

2343

2166

6

16-20-0-13

9203

9073

11030

8419

7294

7294

7294

5451

5729

7

20-20-0-13

10133

10002

12116

9379

8129

8129

8129

6085

6488

8

20-20-0-0

9901

9770

11898

9161

7911

7911

7911

5819

6197

9

28-28-0-0

13861

11678

16657

12825

11075

11075

11075

8147

8676

10

10-26-26-0

15521

15222

18080

14309

11841

10974

10974

9050

8241

11

12-32-16-0

15114

14825

17887

13697

11496

10962

10962

8615

8101

12

14-28-14-0

14037

13785

16602

12825

10789

10323

10323

8093

7753

13

14-35-14-0

15877

15578

18866

14351

12097

11630

11630

9020

8593

14

15-15-15-0

11099

10926

12937

10471

8758

8258

8258

6685

6507

15

17-17-17-0

12578

12383

14662

11867

9926

9359

9359

7576

7375

16

19-19-19-0

14058

13839

16387

13263

11094

10460

10460

8467

8242

17

Ammonium Sulp

(20.6-0-0-23)

5195

5195

5979

5330

4686

4687

4686

3736

4408

18

16-16-16-0 (w.e.f. 1.7.2010)

11838

11654

13800

11169

9342

8809

8809

7130

6941

19

15-15-15-9 (w.e.f. 10.2010)

11259

11086

13088

 

10622

 

8909

 

8409

8409

6869

6709

20

24-24-0-0 (from 1.10.10 to 29.5.12 and w.e.f. 22.6.2012)

11881

 

11724

 

14278

 

 

10993

 

9493

 

9493

9493

6983

7437

21

24-24-0-8

NA

 

NA

 

NA

 

 

NA

 

9493

 

9493

9493

6983

7437

 

(D) Department of Fertilizers has also provided additional subsidy on the NPK complex fertilizers based on Naphtha/ Furnace Oil for Nitrogen for a period of two years w.e.f. 1.4.2010 as follows:

Name of the Company

Grades of Fertilizers

Amount of additional compensation (provisional) in ' per MT

FACT (Cochin)

20-20-0-13 (APS) (Udyogmandal and Cochin)

2331

 

Ammonium Sulphate (20.6-0-0-13) (Udyogmandal)

2792

MFL, Manali

20-20-0-13 (APS)

4784

 

17-17-17-0

4079

GNVFC, Bharuch

20-20-0-0 (ANP)

1914

 

The above rates are on ad-hoc basis subject to finalisation of report by Tariff Commission.

(E) Subsidy for fortified fertilizers

Per MT additional subsidy for fortified fertilizers with secondary and micro-nutrients as per FCO has also been allowed under NBS as follows:

Sl. No

Nutrients for fortification as per FCO

Additional subsidy per MT of fortified fertilizers (')

1.

Boron 'Bn'

300

2.

Zinc 'Zn'

500

 

(F) Procedure for Payment of subsidy under NBS:

Department of Fertilizers releases 85% (90% with Bank Guarantee) 'On Account' payment of subsidy month-wise to the manufacturers/ importers of P&K fertilizers (SSP) based on receipt of fertilizers in the districts/States. The manufacturers/importers claim the 'On Account' payment in prescribed Proforma 'A' duly certified by the authorized signatory as well as the statutory auditor of the company. The balance payment of subsidy is also claimed by the fertilizer companies based on information in prescribed Proforma 'D' duly certified by the authorized signatory as well as the statutory auditor of the company. The State Governments are required to submit certificate to DOF in receipt of the fertilizers in prescribed Proforma 'B'. The payment of subsidy to SSP is released on sales basis. Accordingly, the eligible units are allowed to claim 85% 'On Account' payment of subsidy based on the information in respect of sale of SSP duly certified by the authorized signatory as well as the statutory auditor of the company. The balance payment is released by DOF based on the certification of sales issued by the State Governments in prescribed Proforma 'B'. Importer guidelines dated 21.9.2017 for importers of P&K Fertilizers under the NBS Scheme are annexed as per Annexure – ‘A’. Freight Policy dated 23.7.2012 for P&K fertilizers are annexed as per Annexure – ‘B’.