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February 1, 1999
Fertiliser body warns govt against bringing back customs duty on machinery
The Fertiliser Association of India, the official body of both public and private sector fertiliser manufacturers, has warned the government against the move to reintroduce customs duty on machinery and projects imports required for a fertiliser plant in the forthcoming Union Budget.
In a note submitted to Finance Minister Yashwant Sinha, the FAI has also pressed for drawing up and implementing a holistic and integrated approach to the entire fertiliser sector in the interest of national food security.
The association has pointed out that some of the recent decisions like raising of the urea prices to cut the mounting subsidy burden on the national exchequer would not solve the problems in the fertiliser sector.
It suggested that the government should pick up courage and go in for a gradual increase in the selling price of all types of fertilisers to offset the periodic increases in cost of production and to ensure a minimum return on investments to the manufacturers.
The FAI has pointed out that zero-duty import of fertiliser plants was allowed by the government as part of the economic liberalisation and to bring in the production costs of locally made fertilisers at par with those of other countries. Rolling back the duty concession would push up the production cost which would have to be borne by the government in the form higher fertiliser subsidy, it added.
The assocaition was firm that the rising fertiliser subsidy bill could be checked or contained only by addressing fundamental causes. It asked the government to take a bold decsion to raise the urea prices by ten per cent every year in the next few years till the subsidy could kept at manageable levels.
It pointed out that the present system of fertilsier subsidy management favoured the oil sector as bulk of the subdidy support was passed on to it by the fertiliser industry.
The FAI said although the government had decontrolled the selling prices of phosphatic and other complex fertilisers, they continued to be under price control as both the consumer price as well as the levels of concessions on them were fixed by the government. The resulting subsidy burden is again borne by the Union government.
The association pointed out that the ad-hocism in fertiliser pricing had worsened the financial viability of the fertiliser industry. Any deterioration of the industry's health could adversely affect the national food security, it added.
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