Context:

Recently, the Department of Fertilizers (DoF) issued detailed guidelines for evaluating the “reasonableness” of the MRPs for all non-urea fertilizers covered under NBS.

New Guidelines On Non-Urea Fertilizers

• The guidelines basically extend the regime of detailed cost monitoring and price control currently applicable on urea to other fertilizers. 
• Effective: The guidelines to be effective retrospectively from April 1, 2023.
• Profit Margins: The guidelines have prescribed maximum profit margins that will be allowed for fertilizer companies:
  • 8% for importers, 10% for manufacturers and 12% for integrated manufacturers (those producing finished fertilizers as well as intermediates such as phosphoric acid and ammonia).
• Refunding: Companies earning “unreasonable profit”, in a particular financial year will have to refund the same to the DoF by October 10 of the following fiscal year. 
• Indirect Control on MRP: The new guidelines impose indirect MRP controls on non-urea fertilizers by capping the profits that companies can earn from their sales, on the basis of “total cost of sales”. 
• Self-Assessment: The fertilizer companies to “self-assess” unreasonable profits, based on the cost auditor’s report and audited cost data approved by their board of directors. 
• Punishment: If companies don’t return the money within  time limit, “an interest @12% per annum on a pro-rata (proportional) basis would be charged. 

News Source: The Indian Express

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