constituted - of Planning Commission

The Thirteenth Finance Commission has stated that the fertilizer subsidy needsto be targeted to ensure food security and self-sufficiency while preventingwasteful and suboptimal use of fertilizers. They also said that they have beeninformed that given the oligopolistic nature of the global fertilizer market, withIndia as a large buyer of key fertilizers, restraining inefficient fertilizerconsumption would also result in price benefits in the medium term. TheDepartment of Fertilizers, in their interaction with the Commission, also madethe point that a reworking of the subsidy regime would promote optimal use offertilizers as well as better targeting of the subsidy. With these considerationsin view, the Commission took a reference point, the recommendation of thePM’s Economic Advisory Council (EAC) to restrict this subsidy to 120kilograms of fertilizer per cultivator household. [The report of the EconomicAdvisory Council (2007) states that 120 kg of fertilizer (comprising 80 kg ofnitrogenous fertilizer, 30 kg of phosphatic fertilizer and 10 kg of potassicfertilizer) provide a well-balanced total of 60 kg of nutrient]. This will meet thefull requirement of small and marginal farmers and will also meet the selfconsumptionfood requirement of medium and large farmers. The balancerequirement is to be met from the free market. On this basis, the estimatedfinancing requirement for this subsidy was `10,980 crore in 2006-07. TheCommission considered this to be reasonable target for 2014-15 if oil prices(which are closely aligned with the freight on board (FOB) unit price of thefertilizer basket) remain around US $70 per barrel. To achieve this, in theterminal year, the 2009-10 (BE) figure were reduced equi-proportionately eachyear so that the forecasted subsidy provision in 2014-15 is equal to the targetfigure of `10,980 crore. The Commission did not allow for any inflation as itexpected trend prices to be lower than those existed in 2006-07, not least due tothe expected inhibition of cartel formation in international fertilizer supplyduring the Finance Commission award period.In the Fiscal Policy Strategy Statement 2011-12, it has been stated that in orderWorking Group Report on Centre’s Financial ResourcesPage-39