Removal of the minimum capacity utilization criteria for SSP Manufacturing Units to be eligible for subsidy under Nutrient Based Subsidy (NBS) Scheme

No: --- Dated: Mar, 10 2016

In order to push major policy reforms in the fertilizer sector, the Union Cabinet, chaired by the Prime Minister Shri Narendra Modi today approved the proposal for removing the minimum capacity utilization criteria for the Single Super Phosphate (SSP) units to be eligible for the subsidy under the 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. Due to the emphasis on promoting energy efficiency and rationalisation of gas pricing mechanism, highest ever urea production in the period so far has been achieved this year. It is expected that there will be an additional production of 17 lakh MT of urea this year as compared to last year. Moreover, to prevent diversion to non-agricultural use and to enhance productivity, 100% 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 utilizing the city garbage as compost for improving soil health. Under this policy, for the first time market development assistance of Rs.1500 per MT will be provided to scale up production and consumption of the product. 

SSP is a phosphatic multi-nutrient fertilizer, which contains 16% phosphate, 11% sulphur, 16% 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. 

From 01.10.2009, it was made mandatory for the SSP units to utilize minimum 50% of their recognised production capacity or to produce 40000 MT, 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 utilization 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 their brand name and to increase the market share due to inadequate availability of dealers’ 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 the same footing as other fertilizers and they would be eligible for subsidy irrespective of quantity of SSP produced and sold for agriculture purposes. 

This new policy 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. 

This would also encourage the evolution of a robust mixed fertilizer market with diversified micro-nutrients to promote balanced fertilization of the soil. 

This new policy would be uniformly applicable to all fertilizers and provide a level playing field.