Date:03/07/2009 URL: http://www.thehindu.com/2009/07/03/stories/2009070355911300.htm

Business

Decontrol sugar, fertilizer sectors to cut subsidies

Special Correspondent

‘Price control should be limited to essential drugs’

NEW DELHI: Seeking to put a tab on the rising Government subsidy bill, the Economic Survey has called for total decontrol of sugar, pharmaceutical and fertilizer sectors. It recommended changing the subsidy policy by giving government assistance directly to consumers instead of producers.

At present, the sugar sector is totally controlled by the Centre, right from setting up a mill to selling the sweetener in the market. In the fertilizer sector, the government has fixed the maximum retail prices of all major nutrients to provide farmers these fertilizers at cheaper rates while subsidising manufacturers on the difference between cost of production and MRP.

In the 2007-08 budget, the government had mentioned about launching a pilot project on direct subsidy to farmers but the scheme remained on paper following stiff resistance from various quarters. The Economic Survey has recommended converting fertilizer subsidy from a part-producer subsidy to a wholly farmer-user nutrient-related subsidy, with freedom to producers to set prices of formulations with different mix of nutrients.

Rising subsidy bill

The fertilizer subsidy bill surged to a record Rs. 1,17,000 crore in 2008-09 fiscal from Rs. 45,659 crore in the previous fiscal, due to unprecedented rise in the prices of farm nutrients in the early part of the last fiscal.

India had imported 175.30 lakh tonnes of urea, DAP (diammonium phosphate) and MOP (mureate of potash) in 2008-09.

While there was no production of MOP, urea output was 199.22 lakh tonnes and DAP 29.33 lakh tonnes in last fiscal.

The country had also produced 68.48 lakh tonnes of complex fertilizers, which were partially-subsidised.

Although, there is no direct subsidy involved in the sugar sector, the government had last year extended transport assistance to mills for undertaking exports in 2007-08 (October-September).

The survey has also called for decontrolling of drug prices and limiting the checks only to essential drugs, which have less than five producers. “Drug price control should be limited to essential drugs in which there are less than five producers. All others should be decontrolled,” it has stated. The previous government had drafted a National Pharmaceutical Policy that aimed at increasing the national list of essential medicines to 354 from 74.