''Decontrol per se is not much of fertiliser policy''

He's the man in the hot seat. Last month, Union Minister for Chemicals and Fertilisers Suresh Prabhu unveiled the Background Paper On Long-Term Policy For The Fertilizer Sector at a seminar in Delhi. Ever since, the 48-year-old chartered accountant-turned-banker-turned-politician has been busy discussing the draft policy with stakeholders-farmers, politicians, and industry. A soft-spoken, Net-savvy minister, Prabhu defended the shortcomings of the policy paper in an exclusive hour-long interview with Business Today's Ranju Sarkar and Seetha.

You have been holding a lot of roadshows, discussions on the new policy? What's the idea?

Let me explain the policy to you first. We have released a draft fertiliser policy. We are discussing this draft with all the parties concerned. In fertilisers, stakes are high for everybody concerned, and there's a lot of conflict of interest. The opinion of the farmers' organisations was that you must shut down all the sick units. They say that rather than keeping some jobs artificially alive, why don't you give that money to us in terms of subsidies. Then you have the Finance Ministry, which always feels that we should not only reduce but stop giving any subsidies, if possible. Then you have the conflict of interest between farmers and industry. Industry feels that we should raise the price of urea over a period of time; the High Powered Committee (HPC), headed by Prof Hanumantha Rao, had also recommended that. And partly acting on that, we have increased the prices by 15 per cent. We are taking into account the views of different stakeholders and interest groups while trying to evolve a policy.

We have made a departure from the past. Traditionally, policy announcements would be made at the stroke of midnight or in the wee hours of the morning so that nobody would know what's happening. And then it would be a fiat accompli for everybody concerned. But now, we have a draft policy which is being circulated to all the stakeholders, MPs, trade unions, farmers' organisations, media, academicians-anybody I can think of. We have also put it on the Net. In addition to this, I have already completed one set of interactions in the Western Zone with all the states. Tomorrow, I am going to Calcutta for the Eastern Zone consultations. I will be completing the Southern Zone on September 28, and we have had quite few discussions in Delhi, FICCI House. Which leaves only the Central India. (Interview held on August 25, 2000). These discussions are part of a strategy to elicit ideas from stakeholders and interest groups on the draft policy.

What's the status of the policy? When do you plan to unveil the final policy package?

This is the process which is going on. This morning I discussed the draft policy with the members of the Consultative Committee on Fertilisers. The Committee of Secretaries has already considered it; we will be discussing this, and finally we will have to go to the Cabinet.

Based on the interactions you have had so far, do you expect any major changes from what's proposed?

I don't think there's a major criticism of the policy. In fact, the approach that we are adopting is a gradual one. We are not dismantling the controls. We are not really removing all the checks in the sector in one go. We are trying to do it over a period of time. So, it's gradual. Someone could say ''the pace is too slow'' or ''do it one go''. But I don't think it's advisable in a country like ours to play with the country's food security. We cannot unveil a policy just because we want to meet a deadline-August 15 or any other date. We need to have as large a consultation as possible. Since 1977, no government has been able to come out with a policy like this. And no government has ever made an attempt to frame policy in this participative manner. When we are talking about new regimes in which policies are evolved in a participative manner, then it takes time. What is important is that our approach is clear. It's in black and white. And there is total transparency; not only in the policy, but also in the discussion that is going on. It's an open debate.

The fertiliser industry has been saying that the government should go in for total decontrol instead of phasing out over eight years? Do you think they really mean it or is it simply posturing?

I don't want to attribute any motives. If they are saying so, we would rather believe it. But I don't think it is the right thing to do.

Why do we need such a long time-frame? It's been almost seven years since India started liberalising, but the fertiliser industry is still stuck in its old ways. Do you think the time-frame could have been shorter?

That's only one side of the story. Today, there is a growing sentiment even in the Consultative Committee, or even among the farming community, against complete decontrol. A number of people are saying that the sector cannot be decontrolled. How can you leave everything to the market forces. What happens to the NPK ratio? What happens to the micro-nutrients? Who will ensure that? Will market forces ensure these crucial things. And what will happen to the pricing? Today, pricing is one of the intervention mechanisms through which we influence the composition and use of fertilisers. So, there's a contrary view which holds that there should not be any decontrol. It's a good utopian thought: why not do it at one go. In a sector like this, which is so critical to India's food security, we cannot afford that.

But instead of phasing it out over seven years, could it have been done on shorter time-frame?

There's another problem: if you decontrol today, a large chunk of the Indian fertiliser sector's capacity would become unviable. This is happening at a time when we are talking about the WTO and the attendant policies. A large number of domestic units will go out of business. We want to protect the domestic industry to the extent possible. We also want to ensure that the farmers are not left solely to the vagaries of the market. We also want to ensure that we don't have to go and import indiscriminately. We have seen consequences of that in the past.

In fertilisers, the prevailing international prices are not reflective of the ground realities. India and China are the only two bulk buyers. If India and China together enter the market, the price of urea, which is prevailing around $110-115 per tonne, can easily become $250 per tonne. So, people who compare the landed cost of urea with the manufacturing cost of domestic units need to take this point into consideration. Even if you presume that it doesn't happen and we import at a lower cost, what happens to the domestic industry's capacity? This the problem with a drastic step like complete decontrol.

How do you plan to deal with the issue of rising fertiliser subsidies? Does the policy address that? In the past, simple solutions have been ignored-for instance, fertiliser prices can be increased simultaneously with support prices. How do you plan to tackle the subsidy issue?

What looks like such a simple thing is, in fact, not so simple. When we raised urea prices by 15 per cent, there was an enormous hue and cry. And, it was not merely political. People say that we lack political will. It isn't that simple. You have to understand the realities from the farmers' perspective.

When we are talking of increasing fertiliser prices, there are several states where the power prices are going up, input costs are going up, but the rise in prices of agricultural produce is not commensurate with the rise in input costs. So, increasing urea price may look like a simple solution, but it's not all that simple.

We should not be averse to the word 'subsidies'. Only thing we should realise is that the Government of India's financial position must be taken into account. Today, we are paying Rs 100,000 crore as interest out of government's total income of Rs 182,000 crore. We must find out in that context, what is the fiscal ability of the government to pay those subsidies.

But what I meant was that within the new policy framework, how do you plan to deal with subsidy?

Subsidies will inevitably be there. If you want to continuously increase agricultural production in India-it is 200 million tonnes now, you may want to take it to 400 million tonnes-we must have enough incentive for people to be engaged in the farming activity, and increase production. If you want to do that, then this activity has to be economically sustainable. And to do that, you need proper use of fertilisers. Some subsidy is then inevitable.

Farmers are benefiting from the subsidies. The final price, the farmgate price, is predetermined. And since the farmgate price is predetermined, we are working backwards to see what the cost of production is. The only complaint against the system is that there's no incentive for units to get efficient. But this new system, which has been recommended by the HPC headed by Dr Hanumantha Rao, will ensure that they will move towards a more efficient system.

Economists feel that too much emphasis has been placed on the price of fertilisers and argue that other issues like irrigation and availability of credit have a greater role in influencing fertiliser consumption. What would you say on that?

Basically, this is one school of thought. There's another school of thought. Elasticity of demand for use of fertilisers is definitely linked to prices. To what extent it is price-elastic, or other inputs are, there is no scientific study available on that. We have seen that every time we increase the prices, there's some result on fertiliser consumption. That does not mean, we should not raise prices. But there's no simple solution. We have to also ensure that the price increase in fertilisers does not lead to a drop in consumption. There's a glut in the market; the opening stock of fertilisers is very high this year.

In the past, policies in the fertiliser sector have been governed by the objective of achieving self-sufficiency in food production, and hence self-sufficiency in fertiliser production. Do you see a strategic shift vis-à-vis that stated policy? Will we be increasingly depending on imports since international prices are lower and feedstock prices higher in India? Will there be a strategic shift in the policy vis-à-vis the self-sufficiency part of it?

This policy cannot be oblivious of the realities of the WTO-we have to remove the quantitative restrictions (QRs) and actually start importing. We cannot say that there won't be any imports possible. Imports, under our commitment to WTO, are inevitable.

But you may still decide and control the quantum of imports by raising the bound rates...What level of imports and domestic production is the new policy targeting at?

We have limited choice with bound rates. Self-sufficiency, post WTO is a different concept, than in 1977 when we talked about the Retention Pricing and Subsidy Scheme (RPS), in which self-sufficiency was thought of. All these reference points have changed over the last 20 years. We have to see how we can have enough incentives to sustain and increase domestic production. And that's what we are aiming at.

As far as imports are concerned, they are inevitably going to take place. We have to make ensure our industry stays competitive even while that happens. Or do we want the entire industry to close down? In fact, we should have come out with this policy document at least 10 years earlier. At least, we have made a beginning. We have put it before the people. Whatever delay has taken place has taken place. We cannot be oblivious to the realities of the WTO. We now have to redefine the word self-sufficiency. Probably, in all the sectors where you have similar arguments.

Downstream units want to import cheaper to remain competitive, but they are using steel which costs higher than the landed cost of imports. So, the concept 'self-sufficiency' has to be redefined. We want to promote and protect the domestic industry to the extent possible. And this policy is making them aware, preparing them to face the challenges. WTO is a reality today. We are not reinventing something. It's something that is there. And we have to take that into consideration.

The policy document is largely based on the HPC recommendations. But the industry had serious reservations with respect to specific numbers of uniform price-the normative referral price (NRP) based on long-run marginal costing (LRMC). Does the new policy addresses these reservations?

We have, to a great extent, taken those reservations into account. At the same time, I had discussed this document with the CEOs of fertiliser companies a month ago. We have to take into account all the views. You must recognise that it's a draft fertiliser policy. Such amendments are possible to the extent that these suggestions are reasonable, and are within the overall ambit of our policy goals.

The most crucial question is that of pricing, but the policy paper seems to be silent on it. The paper doesn't say much about what the pricing policy would be. What will the specific uniform prices for naphtha, fuel oil, and gas-based plants be? And have they have been updated?

You must realise that this is a long-term fertiliser policy, whereas what we are talking about is a pricing policy. For different pricing periods, there have been different policies. If you take the fertiliser policy as static, then this (pricing) is a dynamic process within that. Pricing policy is part of it; it's a flexible mechanism which will change from time-to-time. Pricing policy is a small part of the fertiliser policy. The paper says that there will be a pricing policy for that period. As to what will be the components of that, will be discussed separately. It's not necessarily to be part of the long-term fertiliser policy.

The policy paper is largely based on the HPC recommendations. But one of the problems was that these recommendations (of uniform NRP based on LRMC) don't take into account the price differentials within feedstocks. Naphtha prices vary for any two naphtha-based units...

It's an absolutely valid point... I accept that. How can we not take into consideration the price differentials of gas for units along the HBJ pipeline?

But without the specific update numbers, without really saying what the specific pricing policy is going to be, can we really have any meaningful debate?

I am not surprised. The long-term policy sets the benchmarks, the milestones. It says that how we are going to proceed on this. Within that period, for instance, there are several pricing policies between 1977 and now. The pricing periods could have been delayed.

The industry knows about this. But it also possibly feels the need to play the role of an opposition party. So, it may be saying something different. Otherwise, this is something which is very clear. Even yesterday, I met the industry chiefs and told them that this is a point which will be taken into account. When we are discussing mathematics, they may be saying that there's a serious problem in physics. We are not denying that. We will discuss that when the physics lecture is on. Right now, we are discussing the long-term fertiliser policy in which obviously there are short-term problems.

Fertiliser industry's development and survival will depend on one crucial factor--and that is feedstock. If we are talking of feedstock, there are differentials in prices which are realities, and will be taken into account. Now, it may not have been specified in absolute numbers. But the long-term fertiliser policy will definitely take that (the pricing policy) into account.

With regard to feedstock, it's simply not possible to economically produce fertilisers through naphtha or fuel oil-based units. How do you plan to cope with that? The paper talks about LNG, but none of the LNG projects have come off. Besides, LNG will be as expensive as naphtha, and by then naphtha prices may come down...

LNG as a preferred feedstock is the recommendation of the Hanumantha Rao Committee in which the industry was represented. Firstly, the report has been there for a long time, but nobody has challenged this recommendation of the committee. It also talks about the joint venture route, wherever such feedstock is available at preferred rates. For example, LNG will cost $3.5 per million BTU here; while in the Middle East, it may cost you 75 cents. LNG was acknowledged as a preferred feedstock.

You would like the naphtha and fuel oil-based units to shift to gas, which will require them to invest Rs 300 crore each, but the FIs may not be willing to fund as fertilisers are hardly attractive...

Why is it not attractive? Have they stopped funding the fertiliser companies after we came up with the draft fertiliser policy?

The Fertiliser Association of India's representation has been that fertiliser scrips are going down, there hasn't been any foreign direct investment in this sector. Worse, there hasn't been any fresh investment in this sector either.

But when did this happen?

Between 1977 and 2000. What we needed was a change from that policy which prevented any fresh investment in this sector. We are talking of a new policy. I would like to have closer interactions with the FIs, the fund managers, and I am going to ask them what they feel about the new policy. If this policy does not attract investments, it won't help. This is a draft policy, and not a policy. You must understand that. Hence the debate.

The fertiliser industry contends that if LRMC-based uniform normative referral price is adopted, 40 per cent of the capacity will become unviable because it does not take into account the differentials in feedstock prices. At the end of the day, you still have three prices, while the industry is much more heterogeneous. What do you say?

Let us presume it's true. We are not doing that. We are going to definitely take the differentials into account. But what's the solution? Does that mean we have to ensure that each and every unit which exists in India today, irrespective of costs, technology, feedstocks? If this was the objective of the policy, then it would be a different thing. Then, we would have to make sure that each and every plant becomes immortal for eternity. Is it something we should talk about?

What level of self-sufficiency in domestic capacity is the government comfortable with? What level of imports are we looking for?

You say that we should decontrol faster, we should reduce the time-frame. If that's what we are saying (when we are dismantling), where's the question of the government guaranteeing capacity? How can you ensure? On what basis? When you are talking of total decontrol. Can you do it in other sectors? Such as steel.

We have to only ensure that enough incentive is available for people. It's a draft policy. It's possible that there are not enough incentives. Which is why we have initiated this debate.

You have reassessed the capacity of some gas-based units. But, doesn't this amount to punishing the more efficient...?

From April 1, 2000, we have reassessed the capacities of many fertiliser units. As a result of which several fertiliser companies are showing losses. We are not paying the Rs 600 crore which would have been paid as subsidies because we have reassessed the capacities. What do we mean by the reassessment of capacity? The RPS, which guarantees a particular rate of return-forget the rate of return, which may not be happening-and determines the per unit cost of production (capital cost, conversion cost and variable costs). Once that is determined, you multiply it with your production, and you get your subsidies. And you assess the capital-related charges (CRC) based on certain capacity utilisation norms.

It was suspected that some of the units were showing lower capacity than their intrinsic strength. And this has been happening over a period of time. The capacity of a unit has to be reassessed based on actual production. We did that. And because of that, there has been a reduction in subsidy. And they are complaining about the same. I am not saying that the industry or someone else is to be blamed, but since 1992, there has been a demand in the Parliament that reassessment of capacity should take place. The economists have been saying that the fertiliser lobby is so strong that the government cannot do anything. The Parliament, the Joint Parliament Committee, the Standing Committee of Department of Fertilisers have been demanding. So, we reassessed the capacity.

But hasn't the government always been aware of this? In the past, the government regularly encouraged them to produce at a higher capacity...

If the government knew about it, they should have reassessed the capacity. At one level, you are saying that we should recognise the differential in technology, differential in feedstocks. And irrespective of what they are doing, we should recognise and give them money. Here, you are saying you should encourage efficiency. But there cannot be a criticism for everything that we do. What you were saying earlier is also right and what we are doing now is also right. You must give perspective to the criticism. If you feel efficiency has to be rewarded, how can we not predetermine those parameters and ask the units to attain those parameters.

Is it true that the Committee of Secretaries seems to have updated the numbers for uniform NRP, and the feedstock differential cost reimbursement (FDCR) for naphtha and fuel oil-based units...

I cannot speak on pricing policy at the moment. This is not a subject matter for discussion.

But isn't that the crucial issue?

Not really. Do you want to say that the FIs who are going to make investments are going to do so based on your pricing policy for two years? In any case, fertiliser industry has a long gestation period. What are the payback periods for fertiliser companies? Even under the RPS, it's seven-to-nine years.

The pricing policy assumes importance in view of the industry's reservations on the HPC's recommendations, and if the issue of differentials in feedstock prices have been addressed or not...

The Hanumantha Committee recommendations talked about a fertiliser policy in which you have a pricing policy. But pricing policy is a short-term measure, while fertiliser policy is a long-term measure. Right now, we are trying to address the long-term measures. Industry may have reservations about the short-term measures, which we have unveiled. We are working on one, simultaneously. But this (pricing policy) is not necessarily going to be part of it. It's almost like we are playing a cricket match, and we are talking about our performance in hockey. The industry says that if we won't survive the first innings then where's the question of playing the second innings. What we are saying is that we are playing a limited overs match. Where's the question of second innings? We are discussing two different things. One is a five-day test match, and other is a limited-overs match.

What would say on the industry's apprehension that 40 per cent of the installed capacity, based on naphtha and fuel oil, would become unviable if uniform NRP norms are accepted?

We can either decide certain efficiency norms, and those who do not comply become unviable. The other way is to find out how many units there are, and how we can make sure each of these units survive. If the policy is to ensure that 100 per cent of them pass the test, it becomes a different issue. The policy would aim at making the units more efficient, and make them capable of taking on the challenge from the WTO. Too many controls on the industry are not desirable. Today, everything from production, product-mix, distribution, and onward marketing is controlled. Who will sell where, I decide here. It's ridiculous.

Instead of targeting subsidy, the new scheme will merely replace the RPS?

It's a short-term measure. The industry wants the NRP. Let the industry come and say that we don't want it. They may say we want decontrol for strategic reasons. But then, how many units will survive? If we go in for decontrol, and if we start importing, what happens to the industry. We are not trying to score points here. We are discussing the long-term. NRP will be there only for the short term, and that too to ensure that the domestic industry survives.

Isn't there a danger that you provide a temporary shell, the industry gets used it, and this kind of control continues? The same thing happened when you decontrolled phosphatic fertilisers?

The parallel is not wrong, but let me explain. Somebody getting used to it is a reality. Since 1977 to 2000, they have been used to it. In the interests of the industry itself, we must ensure that some transition period is in place so that from total control they don't go into total decontrol.

The industry is saying repeatedly that they are ready for total decontrol...

Ready for decontrol would mean what? Imports will be possible. And everything will be possible.

I have met people in the industry; they have met me in person, and I know. Nobody is interested in total decontrol. Public posturing is one thing, and I will tell you something which is a reality.

The industry is only one of the stakeholders in this. You also have the farming community and the society.

But if you import more and subsidise, then what's the point? The idea is to reduce subsidies

We are willing to give subsidies. We will subsidise the farming sector. Some element of subsidy will be there. Farmers cannot afford to pay more. But if the industry says we will charge more, it's artificial. Nobody is going to buy at that price. The government cannot afford it as well.

In the policy itself, we are talking about buffer stock, about market intervention, we are talking about difficult states (geographically). Because, when we remove distribution controls, how will North East or the hilly areas get fertilisers? So, some market intervention is likely in any case. We have to see how the farmer benefits. If prices skyrocket, how will industry benefit? Public posturing is a different thing. Privately, they positively say they don't want decontrol.

Like the government policies of the past, this policy paper, too, is highly skewed in favour of urea, and is largely silent on decontrolled fertilisers... There are a number of issues here, purely administrative in nature. The paper doesn't even mention those?

It's a valid criticism. This particular issue is handled by the Agriculture Ministry. The Department of Fertilisers can only prepare a policy concerning the department.

Shouldn't a policy like this be more holistic?

Not really. By the time we come up with a long-term policy, administration of decontrolled fertilisers may be transferred to the department. This is a draft policy. There's a possibility. The PM has to decide.

What level of imports are we looking for? The fact is that whenever India enters the market, prices go up? Can imports be sustainable?

These are questions which were relevant at a time when we did not have the WTO. We had a choice, QRs were possible. The entire benchmark for such issues have changed over time. So, we cannot decide artificially. It can happen only by giving proper incentives to the domestic industry by ensuring that our pricing policy in the short term is conducive. But we cannot decide the level of imports.

Why not? A bound rate of Customs duty of 15 per cent may encourage imports, but a rate of 40 per cent would discourage imports? What's the government's thinking?

We are looking at that issue separately. We have constituted a WTO taskforce under Secretary, Department of Fertilisers, A.V. Gokak.

We have the Gokak taskforce on the WTO, you have the Committee of Secretaries which is looking into the pricing policy, you have the Y.K. Alagh Committee looking at the reassessment of capacity, and finally the Expenditure Commission under Geethakrishnan, which will look at the fertiliser subsidy. Why do we have such piecemeal approach?

They are all separate issues. What is lacking in this? There's a policy which talks about the WTO, which is for 20-25 years. Probably 15 years. While we are talking about, a taskforce to operationalise the policy. So, where's the question of a holistic approach. Policy and practice are two different things. The policy talks about reassessment, but we have already reassessed the capacities. To a great extent, I have operationalised the policy.

The policy aims to replace the RPS with a uniform NRP, without tackling the subsidy issue. In fact, difficult decisions have been postponed for a later day?

A large number of people are saying that there should not be any decontrol. If we decontrol, the government will have no control over movement of fertilisers. Nobody would like to move any fertilisers to the eastern sector (there are no plants operational in eastern India). Hilly areas, and North-East would not get fertilisers. Everybody wants to sell as locally as possible.

Then again, more than 70 per cent of the fertilisers produced is consumed by just 100 districts; it's already skewed that way. These districts will continue to benefit; while the others don't get any fertilisers. Second, prices will go up considerably. As a result, some farmers won't be able to afford it. Agriculture production will get affected. Some fertiliser companies will go out of business. Traders will import under OGL. What will happen in such a scenario? Everything will get affected. There will chaos, there will food riots. Do we risk that just to prove we can decontrol immediately.

Is the government considering giving subsidy directly to the farmers, instead of routing it through industry? Especially, since we already have a system like the PDS...

This proposal has been already evaluated by the Expenditure Commission; we must look at the viability of doing this. There are utopian ideas, utopian thoughts, newspaper articles. You must look at the realities, on how we can operationalise an idea. Criticism is good thing. But as policy-makers we have to make sure that fertiliser reaches the farmer. How will you ensure that? Today, you have a system so elaborate that every corner of the country is serviced by the industry because we have the ECA allocations under the Essential Commodities Act. If we remove that overnight, how will you ensure it reaches, and what kind of a time-frame are you talking about. That's why we have different landmarks.

One school of thought says control. The other school of thought says that no control-and suggests decontrol. But that is only the economists. Not the industry. Therefore, do we decontrol to satisfy some people and get a kick out of how good we are? It's true when you say that the policy framework which was outdated was not replaced. But liberalisation does not mean decontrol. You have to factor in the ground realities. What's the objective? Is the objective that the farmer must use more fertilisers or not? Is the objective to protect the domestic industry or not? Is the objective to ensure that fertilisers are available at reasonable prices or not? If these are the objectives, how would they be met by decontrol?

Can you forget history? Can you forget that you have the RPS today and everything is controlled? From today's reality, we want to move towards some objective system, but it is going to take some time.

The paper says that prices should be raised at periodic intervals. But don't you think it would make sense to specify the quantum of price hike every year, thereby creating a mechanism? Because in the past too, the intent has been there, but seldom was there any action?

You must understand that this is a policy which is trying to go for total decontrol. These are the issues if we mention 10 per cent price increase. You must see that in the Parliament how the price increase has to be tackled. These are political issues. Which government has increased the urea price by 15 per cent? Saying something for the sake of criticism is a different thing. You must see the realities in life. You must see with what political will we put it through.

I have to make sure the policy passes through different layers. Why 7 per cent and not 15 per cent or 20 per cent? What's the objective? This is one policy which we are trying operationalise even before we announce. There's no policy document which is available, but even then I have constituted a WTO taskforce, a brownfield policy which will be announced within a week's time. We have already got a pricing policy, which is under formulation. We already have a coal taskforce which is working. We are coming with a white paper on sick units. It can't be more holistic.

What is a policy? A document which gives a thrust, a direction. This is what a policy is. The question whether if and every unit which is operating will remain viable is something that we have to see.

In the past, higher feedstock prices have been responsible for increasing subsidies. Some people think that the government should subsidise the feedstocks, what's your view on that?

What does it mean? It means the same thing. It was originally suggested by me to provide them with some level playing field. What is important is that whether you would like to move from the present system, which has differentials. There are several feedstocks which are being used-LSHS, naphtha, gas, and coal (though most of them have closed down). You want to move towards a preferred feedstock. Units can use whichever feedstock they want. On a preferred feedstock, based on some parameters, you decide an indicative price. And that's the subsidy you offer to the units. If unit is efficient, it benefits more. If unit is not as much efficient, it does not benefit as much as the other unit. This in a nutshell is the new system, policy.

We are talking of periodic increase just to make sure that the difference between the farmgate price and manufacture price reduces. The manufactured price changes from company to company. So, what we are saying is that on manufactured price, there will be common parameter which will be fixed; the manufacturing price would be uniformly decided, and over a period of time, the farmgate prices would be increased so that the gap between the two will get bridged. So that when we have total decontrol, the market does not get affected nor the companies get affected. That's why we are talking about this time-frame.

The policy paper also talks about extension programmes. Fertiliser companies cannot confine themselves to just selling fertilisers. The farmers can get all their inputs through them. We are talking of bio-fertilisers and soil problems. We have to think about soil security. We are talking about all these issues for the first time.

We are getting excellent feedback. Public posturing is different, but I don't think there are any serious criticisms of this policy. We would like to get each and every point of view/feedback vetted, and have a counterpoint from the department.

Do you think that the policy document could have been less vague? It does not talk about the pricing policy, the feedstock policy, or administrative issues concerning the decontrolled fertilisers...

I don't know. Maybe I should have another set of people to draft this policy.

Thank You, Mr Prabhu

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