FERTILIZER PRICING POLICIES, PRACTICES AND STRATEGIES-A CASE STUDY OF SPIC LTD
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Date
2003
Authors
Journal Title
Journal ISSN
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Publisher
ACHARYA N.G. RANGA AGRICULTURAL UNIVERSITY RAJENDRANAGAR, HYDERABAD
Abstract
Fertilizer industry has been the backbone of Indian agriculture.
Chemical fertilizers played a vital role in India’s Green revolution and they
continue to play a predominant role in India’s agriculture economy. The
progress of Indian Agriculture has been going through different phases. Over
years specific policy initiatives have set the direction and steered the
development of the agricultural sector to meet the macro objectives in each of
the phases. The pre-Green revolution period saw the thrust on expansion of
area under cultivation and intensifying efforts to increase food production. The
Green revolution period saw the focus on increasing yield through use of
modern inputs, HYV seeds, and chemical fertilizers and investment in
irrigation. The post Green revolution phase saw period of consolidation where
the focus shifted to ensuring equitable distribution of food grains at affordable
prices and management of surpluses. In the current phase we are seeing a
period of Globalization and emergence of a unified world economy. With the
economic reforms of 90’s liberalization became the centre stage in
management of Indian economy. The World Trade Agreement (WTA) came
into effect on 1st January 1995 with countries working towards curtailing
subsidies by 20% over 1986 benchmark. The Indian Government has been
keen to reduce agricultural subsidies, including subsidy on fertilizers, in order
to improve the over all fiscal situation.
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With the objective of boosting consumption and production of
fertilizers, Government has introduced Retention Price cum subsidy scheme
RPS in 1977 in fertilizer industry but in the current reform era as a first step to
reduce fertilizer subsidy, phosphatic and potassic fertilizers were decontrolled
in August 1992. The demand of fertilizer being price elastic, the sudden and
sharp rise in consumer price of these fertilizers adversely affected
consumption. The subsidy had to be reintroduced in the form of “Concession
support” which is still prevalent.
The urea industry has been baffled by the uncertainty in absence
of long-term policy on urea. Over the years, many committees have been
constituted to give their recommendations on reforms in urea sector with a
view to scale down subsidy on fertilizers to meet India’s commitment under
World Trade Agreement (WTA). Apart from introducing Group pricing
scheme categorizing Urea Plants in six groups, effective from 01.04.2003 and
is being implemented in stages:
Stage I : 1 April 2003 to 31 March 2004
Stage II : 1 April 2004 to 31 March 2006
Stage III : 1 April 2006 onwards
The government of India has taken 25% urea production out of
movement control and from 01.10.2003; this proportion will increase to 50%.
The manufacturers will get the freight subsidy Rs.100/- per tonne less on this
deregulated quantity.
The fertilizer industry in India is passing through an extremely critical
phase. i.e., emerging out of a highly protected environment into an
environment of liberalization encompassing among other things decontrol. The
commitment of the Government in the fast changing economic scenario has
been towards gradual deregulation of the economy. Increasing international
competitiveness of fertilizers at par with the best in the world, adoption of most
modern and efficient technological practices of production, all-round and
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balanced growth of the sector, the new scheme has come into effect from 1
April 2003 and is being implemented in stages.
The Government expects that the new pricing policy for urea units will
boost production, encourage internationally competitive production practices,
substantially reduce the burden of urea subsidy and promote greater
transparency, uniformity and efficiency for all round harmonious development
of the industry as a vigorous sector of the Indian economy.
The emerging scenario has thrown up several challenges to the fertilizer
industry, hence the strategy makers in the industry has to evolve suitable
strategies to meet such challenges.
Description
Keywords
FERTILIZER, PRICING, POLICIES, PRACTICES , STRATEGIES-A CASE, STUDY, SPIC, LTD