Non Agri Urea Import Freed from Canalisation

- Arun Goyal -

DGFT has Shifted Technical Grade Urea to the Free List on 28 April. The notification on the subject does not clarify as to what is covered by technical grade urea. It is presumed that all urea other than urea for agriculture use, is freely importable now. This part of the product range covers about 10 percent of all urea production in the world. The best course is to give a separate eight digit code for Urea other than agriculture grade. A narrow definition of agriculture grade may be released while the balance should be free importable on generic broad band basis.

There are many uses of urea ranging from reduction of nitrous emissions in diesel engines to explosive bombs. Urea is the richest source of nitrogen and ammonia and is readily available at a low price of Rs 17 per kilo in the world market.

The actual user condition attached to free importability means that the importer must show to customs that he has the means to use the imported material himself and will not sell the urea to another person. (This condition is an impractical non tariff barrier in today’s world of free markets where goods are sold many times over in both physical and virtual forms before final consumption in a factory or final consumer’s household).

The hold of STC and MMTC on non agriculture urea is a mistake which should have been corrected at the time of policy formulation itself. Urea varieties not under subsidisation were given to these bodies without logic. They minted money from the unintended monopoly, an excerpt from a recent circular from STC highlights the high transaction costs associated with the canalisation:

STC will give to actual buyer its provisional proforma invoice, inter-alia, including the following for making advance payment to STC:-

a. C&F/ CIF value of the goods (inclusive of plus tolerance).

b LC opening /retiring/bank charges @0.54% of (a) above. However, actual charges charged by the bank. STC’s trading margin @2.5% of (a) above.

c. shall be borne by the actual buyer (not STC).

d. Exchange rate fluctuations @10% of (a) above.

Payment to STC by the actual buyer:-

• Advance in Indian Rupees @30% of the total of 6 above.

• Balance 70% to be remitted to STC by way of DD/RTGS/NEFT by the actual buyer upon receipt of intimation of sailing of vessel from the supplier. However, four/five On Dated Cheques, for the value of balance 70% payment, will be submitted by the actual buyer to STC at the time of making 30% advance payment

(A fit case for tort suit on the Government from the users- Ed)

Mess in Urea imports – Time to Decanalise all Fertiliser Imports

The balance segment covering 90% of urea produced in the world is subsidised by the government and canalised thru MMTC and STC. India consumes over 300 lakh tonnes (LT) of urea annually, of which 220-225 LT is produced domestically and the rest imported. And, timing really matters because urea is largely applied within 50 days of sowing.

And the canalising agencies messed up the import, probably deliberately to give the domestic manufacturers a field day. Imports on government account require floating global tenders each time. Also, there is no guarantee of getting the entire tendered quantity, as not every bidder may be ready to supply at the lowest price offered. That means having to re-tender, by which time global prices, too, would have moved up.

It is time to decanalise import. A system to subsidise the farmer through dealer based disbursal through AADHAR account is in order. This will put pressure on the inefficient domestic producers to clean up their act and improve fuel efficiency. In any case, domestic gas is made available to them at pool price which is low. They should now compete with free imports which are already charged five percent customs duty to protect domestic production.

[DGFT Notification No. 04 dated 28^th April 2015]

Subject: Amendment in import policy of Urea under ITC (HS) code 3102 10 00 of Chapter 31 of ITC (HS), 2012 – Schedule – 1 (Import Policy).

In exercise of powers conferred by Section 3 of FT (D&R) Act, 1992, read with paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, the Central Government hereby amends the Import Policy of Urea under ITC (HS) code 3102 1000 of Chapter 31 of ITC (HS), 2012 – Schedule – 1 (Import Policy).

2. On amendment, the ITC (HS) code 3102 10 00 will read as:

ITC (HS) Code	Item	Existing Policy	Revised Policy
3102 10 00	Urea, whether or not in aqueous solution	State Trading Enterprise	State Trading Enterprise. However, import of Industrial Urea / Technical Grade Urea (TGU) shall be free, subject to Actual User condition.

Effect of this Notification

Industrial Urea / Technical Grade Urea (TGU) is being made freely importable with Actual User condition.