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India’s food security scheme unviable, says trade body

Jul 18, 2013

According to Fertiliser Association of India, India’s food security scheme cannot be executed successfully unless farming is made profitable.

The domestic fertiliser industry has raised doubts over the success of the recent Food Security Ordinance by the UPA government saying that distribution approach without addressing food grains production issues would not succeed.

“To achieve the objective of comprehensive scheme and distribution of food grains to 67 per cent of country’s population, an effective delivery system, good minimum support price and remunerative prices to farmers and higher yields are the key ingredients for the success of any food security scheme,” says the Director General of the Fertiliser Association of India (FAI), Satish Chander.

Chander questioned if India has this kind of mechanism for the successful execution of any such programme.

The fertiliser sector which contributes to more than 60 per cent of agricultural yields, is in dire straits because of decline in production of natural gas and undue delay in disbursal of legitimate subsidy dues leading to increased burden of interest on the farmers. In the current scenario agriculture is not considered a profitable business as farmers do not get remunerative price for their produce and need support.

Since, the retail price of urea continues to be controlled by the government, the manufacturing units have to suffer losses due to non-reimbursement of increase in cost, under various heads including conversion cost, interest cost, freight, and additional taxes imposed by state governments.

Millions of Indian farmers would get affected if supply of fertilizers is insufficient and untimely. Needless to say that any disruption in supply of fertilizers will impact the food grains production drastically and will endanger the food security, Chander adds.

“Recently, the government has accepted the recommendations of the Rangarajan Committee for raising the basic price of gas. Wherein domestic gas is also priced in US dollars, depreciation of rupee will further increase the price of gas, cost of production and local taxes.

Subsequently, it will more than double the price of domestic gas. With change of priority allocation, substantial part of gas supplied to fertiliser sector will be diverted to power sector. The total impact of these factors will be about Rs 21,000 crore on urea industry,’’ said R. Mukundan, Managing Director of Tata Chemicals.

Due to continuous hike in gas prices, production of 2.5 million tones of urea from revamp projects is now unviable. If the gas allocation priority changes (due to strategic nature of fertilisers and need to keep cost of production at reasonable levels, the sector was always given first priority in allocation) it reduces the supply of NELP gas and will increase the dependence of urea on LNG.

This can result in all the 22.5 MMTPA of urea manufactured in the country becoming very high cost and unviable, affecting tens of thousands of millions  of direct and indirect jobs, Nearly, 1000 small scale and ancillary industries will get closed, Mukundan said.

“We are certain that in the process of rolling out this very comprehensive scheme, the Government would balance outgo on foodgrain with overall macroeconomic conditions, such as fiscal deficit and inflation. In the present economic scenario, the government can hardly afford to allow the fiscal deficit roadmap to be compromised in any way,” Mukundan added.

Besides, it is imperative to ensure that agricultural productivity is boosted in order to ensure adequate production of food grain. With extra disposable income in the hands of the poor, there would be a welcome shift in dietary preference to high value items such as vegetables, fruits, dairy products, and meat.

By ensuring implementation of the Model Agricultural Produce Marketing Committee Act (APMC), at the state level, encouraging contract farming, and setting up missions for agricultural   technology, sustainability and irrigation, yields can be boosted to global benchmarks, Mukundan explains.

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