Thursday, July 2, 2009

Economic Survey proposes decontrolling sugar, fertiliser sectors

In a path breaking recommendation, the Economic Survey today suggested decontrol of sugar and fertiliser sectors to cut government subsidises.

The Survey for 2008-09 recommended changing the subsidy policy by giving government assistance directly to consumers, instead of producers.

The sugar sector is totally controlled by the Centre, right from setting up a mill to selling the sweetener in the market.

In the fertiliser sector, the government has fixed the maximum retail prices of all major nutrients - Nitrogen (N), Phosphorous (P) and Potash (K) to provide farmers these fertilisers at cheaper rates while subsidising manufacturers on the difference between cost of production and MRP.

In the 2007-08 Budget, the government had mentioned about launching a pilot project on direct subsidy to farmers. But it could not be implemented due to resistance from various quarters.

The Economic Survey has recommended "convert fertiliser subsidy from a part-producer subsidy to a wholly farmer-user nutrient related subsidy, with freedom to producers to set prices of formulations with different mix of nutrients."

The fertiliser subsidy bill surged to a record Rs 1,17,000 crore in 2008-09 fiscal from Rs 45,659 crore in the previous fiscal, due to unprecedented rise in the prices of farm nutrients in early part of the last fiscal.

India had imported 175.30 lakh tonnes of urea, DAP and MOP during 2008-09 as domestic production was not enough to meet the demand. While there was no production of MOP, the urea output was 199.22 lakh tonnes and DAP was 29.33 lakh tonnes in last fiscal. The country had also produced 68.48 lakh tonnes of complex fertilisers, which are partially- subsidised.

Though, there is no direct subsidy involved in the sugar sector, the government had last year extended transport assistance to mills for undertaking exports in 2007-08 season (October-September).

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