Date:17/05/2005 URL: http://www.thehindubusinessline.com/2005/05/17/stories/2005051702170300.htm

Back Talks on phosphoric acid rates fail — DAP supplies may dry up, warn fertiliser cos

Ambarish Mukherjee

New Delhi , May 16

THE latest round of negotiations between the Phosphoric Acid Consumers Group (PACG) and international suppliers failed to reach a decision on phosphoric acid prices for fiscal 2005-06.

Last week, representatives from three main global suppliers had met representatives from the industry as well as officials from the Ministry of Fertilisers on this issue but no decision could be reached.

Industry sources said that while the phosphoric acid suppliers have agreed to cut prices marginally from their earlier offer of $485 per tonne, the Government has suggested a rate of approximately $440 per tonne.

As a result, the domestic manufacturers of di-ammonium phosphate (DAP), who are already faced with severe scarcity of raw material, are apprehensive.

The Managing Director of Tata Chemicals, Mr Prasad Menon, who heads the PAGC, told Business Line: "all the manufacturers are in a very tight position. Even we are operating at lower capacity. If the Government is unable to reach a decision on DAP subsidy, then supplies may soon dry up in the middle of the kharif season."

Meanwhile, the Fertiliser Ministry has revived an earlier proposal under which the subsidy paid for imported DAP and for indigenously manufactured DAP would be equal. This would reduce the subsidy payable to domestic manufacturers as cheaper DAP could be imported.

This, however, does not suit Indian manufacturers as most of them have different types of plant using naphtha or gas as the main fuel and have different production costs. Currently, the subsidy amount is determined on the basis of a group average pricing policy fixed by the Fertiliser Ministry.

Also, during 2002, the Cabinet Committee on Economic Affairs had recommended that domestic DAP should receive a 26 per cent higher subsidy compared to what is paid for imported subsidy. This view was endorsed by the Gokak Committee last year.

A senior official in one of the fertiliser companies, however, pointed out that according to some recent trends traced in the Fertiliser Bulletin, "phosphoric acid prices could be finalised at around $465/470 per tonne on cif basis."