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CCEA to take up new fert policy, kharif crop MSP today
June, 12th 2008

 Aimed at attracting private players in the fertiliser sector, the new fertiliser policy is expected to be taken up for consideration by the Cabinet Committee on Economic Affairs (CCEA) when it meets on Thursday. The minimum support price (MSP) for this years kharif crop would also come up for clearance at the CCEA meeting.

The government might announce an increase in the MSP of rice and other kharif crops. The Commission for Agriculture Costs and Prices (CACP) has already recommended a hike in the MSP to Rs 10,000 per tonne for general paddy, from Rs 7,450 per tonne in the last Kharif season.

The MSP for grade A paddy is proposed to be hiked to Rs 10,050 per tonne, up from the current Rs 7, 250. The current MSPs of both rice grades include Rs 1,000 per tonne bonus, announced in October. In India, sowing for kharif crops start in June and July and harvesting starts from September onwards.

The new fertiliser policy is expected to dole out a package of fiscal incentives for new investors, including concessions in excise, customs duties and income tax holiday. Interestingly, it is also proposed to introduce a reverse bidding process for new fertiliser plants, similar to the process used by the Centre for the bidding of the ultra mega power plants.

Under the proposed policy, the fertiliser price will be benchmarked with international price but it could be five per cent less than international price when the cost of domestic fertilisers is calculated. Domestic Companies will be allowed to participate in global tenders if they can provide supply guarantee on agreed terms. This would rationalise the fertiliser subsidy and introduce an element of certainty.

However, industry experts are of the view that a better way to encourage the private sector would be introduction of a more remunerative pricing policy rather than a slew of tax incentives that more or less already exist.

"As long as the government controls the maximum retail price (MRP) of urea and set limit for the subsidy bill, it will have little chance of attracting fresh investments in this crucial sector whose robustness would decisively impact the country's farm output," a Fertiliser Association of India (FAI) official said.

As per estimates, about 2 million tonnes of fertiliser can be produced domestically solely through de-bottlenecking that would help reduce the import bill. Over the last three  years, Iffco has added 5.25 lakh tonnes of production capacity by de-bottlenecking, at only 25 per cent of the capital cost required to set up a new plant.

The huge subsidy bill pegged at Rs 95,000 crore, mainly due to costly imports, has stopped giving satisfactory returns in terms of agricultural productivity. Rock phosphate that was sold at $ 60 per tonne until recently costs $ 250 a ton now....

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