Govt relaxes subsidy norms for SSP fertiliser units

The union cabinet has decided to remove the minimum capacity utilisation criteria for single super phosphate (SSP) manufacturing units to be eligible for subsidy under Nutrient Based Subsidy (NBS) Scheme, with immediate effect.

This is in continuation of other policy reforms made recently, which include New Urea Policy, 2015 and Gas Pooling for urea production, an official release stated, adding that the emphasis on promoting energy efficiency and rationalisation of gas pricing mechanism has helped realize highest ever urea production this year. It is expected that there will be an additional production of 1.7 million tonnes of urea this year as compared to last year.

Moreover, to prevent diversion to non-agricultural use and to enhance productivity, 100 per cent of urea is now neem-coated.

Further, policy on promotion of city compost is a major initiative which aims at the twin objectives of making cities cleaner and utilising the city garbage as compost for improving soil health. Under this policy, for the first time market development assistance of Rs1,500 per metric tonne will be provided to scale up production and consumption of the product.

SSP is a phosphatic multi-nutrient fertiliser, which contains 16 per cent phosphate, 11 per cent sulphur, 16 per cent calcium and some other essential micro-nutrients. Because of the simple production technique, it is one of the cheapest chemical fertilizer available. It is more suited for crops like oilseeds, pulses, horticulture, vegetables, sugarcane, etc.

The government had, from 1 October 2009, made it mandatory for the SSP units to utilise minimum 50 per cent of their recognised production capacity or to produce 40,000 metric tonnes, whichever is less, per year to become eligible for subsidy. There was some capacity addition in the beginning, but for the last four years the production and consumption of SSP in the country has remained more or less stagnant.

Due to this minimum capacity utilisation criteria, large number of small SSP units which failed to reach this level were not able to avail of subsidy, in spite of having passed the subsidy benefit to the farmer in the form of lower MRP. Many units because of this apprehension, did not commence production.

Non-eligibility to receive subsidy created financial problems, including working capital issues, for the SSP units, which also resulted in loss of capacity. The new units were also finding it difficult to achieve this production criteria as reasonable time is required to establish brand name and increase the market share due to inadequate availability of dealer network. Further, this minimum production criteria was applicable only to SSP and not to other P&K fertilizers.

This new policy to remove the minimum capacity utilization criterion would put the SSP units on a par with other fertilizers and they would be eligible for subsidy irrespective of quantity of SSP produced and sold for agriculture purposes.

It will help revive smaller SSP units and encourage new SSP units to come up in the country to further boost indigenous production of SSP. It would also provide freedom to the SSP manufacturers to plan their production as per the market dynamics. SSP is also considered as a substitute to DAP, which is largely import-based. Growth of SSP industry will not only increase domestic production of phosphatic fertilizers in the country but also its consumption and partly act as a substitute for more costly DAP.