Union ministry discontinues fertiliser subsidy to GSFC

Source : BUSINESS_STANDARD
By : Rutam Vora
Last Updated: Fri, Mar 29, 2013 20:40 hrs

The Union chemicals & fertilisers ministry has discontinued the fertiliser subsidy for producing ammonium sulphate (caprolactum grade) to Gujarat State Fertilizers and Chemicals Ltd (GSFC), blaming GSFC for not passing subsidy benefits to farmers.

“In spite of getting subsidy under the nutrient-based subsidy (NBS) policy, the maximum retail price (MRP) fixed by the company continued to remain at the same level. In other words, the subsidy paid by the government to GSFC has not been passed on to farmers by the company. This defeated the very purpose for which the subsidy is paid by the government,” an office memorandum of the ministry dated March 18 noted.


“Accordingly, after careful examination of the matter, it has been decided to recover the subsidy already paid to GSFC on account of ammonium sulphate from April 1, 2010, till date and not to pay any further subsidy to the company against any remaining or future claims on this grade of fertiliser,” the ministry letter said. “For the purpose of recovery, subsidy paid on the inventory of stocks - of ammonium sulphate as on April 1, 2010 and on the quantities of ammonium sulphate produced and sold on or after April 1, 2010, shall be considered,” the ministry’s letter states.

While the GSFC management could not be reached for comments on the issue, sources privy to the matter said the company had taken up the matter at the highest level of the government.

According to sources, GSFC gets a subsidy of Rs 5,500 a tonne of ammonium sulphate. GSFC produces around 250,000 tonnes of ammonium sulphate every year and sells it in Gujarat, Maharashtra and Rajasthan in line with the supply plan provided by the ministry.

By the estimates based on the current subsidy and production of ammonium sulphate by GSFC, the subsidy claimed by the company since 2010 works out to be Rs 400 crore.

In January 2012, the ministry had sought financial details from GSFC, including the subsidy it received from the government. The ministry says GSFC did not provide any data and justification to substantiate that the subsidy paid by the government had not resulted in undue gains to the company.

Prior to the NBS rollout from April 2010, the subsidy was paid under concession scheme. The MRP was fixed by the government and the difference in normated delivered cost and the MRP was paid as subsidy to the company.

But, GSFC voluntarily opted out of the concession scheme stating that the MRP of ammonium sulphate fixed by the government was high and farmers were showing resistance to such high MRP affecting their sales. This enabled GSFC to fix its own MRP for ammonium sulphate grade of fertilizer from April 1, 2009 onwards.

Later, with the implementation of NBS in April 2010, a fixed subsidy was decided on an annual basis and the MRP was allowed to be fixed by the fertilizer companies. Ammonium sulphate (caprolactum  grade) produced by GSFC, was made eligible for the subsidy under the scheme.

GSFC reported a net profit of Rs 136 crore for the quarter ended December 2012 on revenues of Rs 1,729 crore. For the financial year 2011-12, GSFC had registered a net profit of Rs 758 crore on revenues of Rs 5,302 crore.

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