Cabinet committee on economic affairs approves revised policy for single super phosphates for 2008-09

The  cabinet committee on economic affairs has approved a new forward policy for single super phosphate (SSP) fertiliser submitted by the department of fertilisers, to come in to effect from the year 2008-09.

Over the last few years di-ammonium phosphate (DAP) has been principal sources of 'P' (phosphorous) in fertilisers leading to substantial DAP imports, with even indigenous production being based on imported rock phosphate or phos acid. 

With the prices of these products rising rapidly over the last one year, it was considered essential to look for alternate phosphates for use in fertilisers, with single super phosphates (SSP) having emerged as an option. 

Unlike DAP, 65 per cent of the SSP production is based on low grade rock phosphate which is locally available in India. Moreover,65 per cent of the SSP produced in India is based on indigenous rock phosphate.

Besides containing 16 per cent phosphorous, SSP also has the advantage of containing 11 per cent sulphur and 16 per cent calcium.  Since large areas in the country are deficient in sulphur (46 per cent deficient and 30 per cent potentially deficient) and also in calcium (about 50 million hectares), application of SSP is likely to have a significantly positive effect on improving agricultural productivity ranging from 20 per cent to 40 per cent.

Although there are a large number of SSP manufacturing units in the country, they have been facing difficulties on account of  existing policy constraints. Unlike other fertilisers where the subsidy is adjusted as per the periodic escalation or de-escalation of prices, SSP is given a fixed subsidy of Rs1,125 per MT as its maximum retail price is fixed by the state governments. 

As a result, the share of SSP in phosphorous has declined from 18 per cent in 1991 to 9 per cent in 2006-07.  With rapidly increasing cost of raw material, particularly sulphur, the current cost of production is of the order of Rs9030 per MT (based on imported rock) and Rs7058 per MT (based on indigenous rock). 

Even with the subsidy of Rs1,125 per MT, the manufacturers say they incur a loss as rapidly rising prices haver been eroding their margins pushing them towards sickness or closing down altogether. 

As a result, the current capacity utilisation of the industry is below 40 per cent.  Currently, 64 SSP units produce 20-22 lakh tonnes of SSP every year, whereas the SSP manufacturing capacity in the country is 65 lakh tonnes.

Accordingly the Department of Fertilisers has proposed the following policy changes, which the cabinet committee on economic affairs has approved:
The centre will, henceforth fix a uniform maximum retail price of single super phosphates applicable throughout the country, instead of the current practice of each state governments fixing its own prices.  The centre has fixed the price at Rs.3400 per MT, making it cheaper than the current prices fixed by state governments in Karnakata, Kerala, Orissa, West Bengal, Uttar Pradesh, Bihar, Haryana, Punjab and Himachal Pradesh

In order to compensate the manufacturers adequately, the base concession rate has been fixed at Rs5,630 per MT in case of SSP manufactured on the basis of imported rock phosphate and Rs3,658 for SSP manufactured from indigenous rock phosphate

The subsidy will be revised on the basis of monthly input prices (of rock posphate and sulphur).

In order to ensure quality of SSP, SSP will need to be marketed only through large producers manufacturing more than 1 lakh MT of SSP or the manufacturers of NPK or Urea under the existing subsidy scheme.

The government expects the production of SSP, which has been on the decline, to pick up and help reduce the pressure on DAP. Since SSP contains 16 per cent phosphorous as against 46 per cent in DAP, 3 MT of SSP is likely to replace 1 MT of DAP. 

Given the current high prices of DAP, production of SSP is likely to result in a saving of subsidy of only Rs2500 crore besides encouraging indigenous industry using largely indigenous resources.