Presently, urea is the only fertilizer under the statutory price and movement control of the Government of India. Urea is being imported to bridge the gap between its demand and indigenous availability in the country.

The procedure for import of urea by the Department has three components :

1.0 Assessment of import requirement :

The requirement of urea imports is assessed by GOI in relation to the estimated demand, indigenous production, availability of stocks and pipeline requirement.

2.0 Contracting of Imports

Based on the estimates of imports, designated canalising agents are authorised by the Department of Fertilizers (DOF) to arrange for the imports.

2.1 Procurement of Urea - Canalising agencies

2.1.1  At present, there are three agencies, which are designaed by GOI to canalise the import on its behalf.

          The agencies are :

1. MMTC Ltd.
2. Indian Potash Limited (IPL)
3. State Trading Corporation (STC)

Based on GOI’s estimates of the urea import requirement, DOF authorises the canalising agencies to contract and deliver specified quantities of urea in different months/quarters of the year; these authorisations are issued sufficiently in advance of the requirement.

2.2 Tendering :

2.2.1   The canalising agencies may suitably combine open global tenders with limited tendering looking to the exigency of requirement. In limited tendering, preference will be in favour of producers and accredited suppliers only. Long term contracting with producers is permitted with a view to ensure security of supplies at the internationally competitive prices most advantageous to the country.

2.2.2  Imports are made only with the approval of the Board of Directors or the Sale-Purchase Committee (SPC) constituted by the Board. No single individual is permitted to take decisions relating to purchases, payments etc.

2.2.3  As per the Govt. policy guidelines on Ocean Transportation, imports are to be contracted only on FOB basis. In cases wherein contracting on C&F basis is being cheaper, waiver from Transchart in accordance with the Government policy on Ocean Transportation is a pre-condition.

2.3 Payment by canalising agencies :

2.3.1  All payments are to be made against Letter of Credit (L/C), which shall normally not be transferable, divisible or assignable. However, transferable L/C’s can also be opened in special circumstances with the express approval of the Board or Sales Purchase Committee. L/C shall be opened after receipt of the Performance Guarantee and a copy of the signed contract.

2.3.2  The Performance Guarantee will NOT be released till all claims have been settled by suppliers.

2.3.3  Those suppliers who have not settled claims for the last one year, shall render themselves to be placed on ‘holiday’ till such time as the outstanding disputes are resolved.

2.4 Choice of Suppliers :

2.4.1  In procurement of urea, the reputed international producers and accredited suppliers of urea enjoy preference in respect of bid bond and performance bond conditions vis-à-vis new suppliers. These are laid down as under :

2.5 Release of payments to the canalising agencies :

2.5.1  The cost of the cargo against the specified contract is released to the canalising agencies in two stages :

a) First stage : Advance payment of 98% of the cost of cargo within10 working days after the receipt of the bill from the canalising agency.

b) Second stage :  Balance 2% payment along with the bank/ service charges, loadport inspection charges etc. are released on the basis of the expenditure sanction issued by the Department.

The supporting documents required for processing 98% advance and balance 2% payment are detailed at Part I of Annexure ‘A’.

2.6 Payment of ocean freight including despatch / demurrage with vessel owner and settlement with handling agencies :

2.6.1  The ocean freight is payable in two stages :

a) First stage : Advance 90% of the ocean freight is paid within 7 working days of the sailing of the vessel if it is less than 15 years of age. In case the vessel is over 15 years of age, it is made after safe arrival at the discharge port.

b)Second stage : Balance 10% freight with demurrage (if any), or less despatch (if any), is payable to charterers within 120 days of completion of discharge.

The documents required for processing the Ocean freight payment are detailed at Part II, of Annexure ‘A’.

2.6.2  The total brokerage commission due to Indian broker under the Charter Party Agreement, is deducted from the first stage payment and is paid to the broker direct in Indian rupees converted at the exchange rate prevailing at that time. However, brokerage commission on demurrage, if any, is deducted from the second stage payment to the vessel owner and is paid to the broker at the time of release of balance freight.

2.6.3  The Settlement of despatch / demurrage with ship owner is done by DOF on the basis of the lay time calculations given the Transchart at the time of settlement of 10% balance freight.

2.6.4  The Settlement of despatch/ demurrage with the Handling agency is made on the advise of shipping cell in DOF and after seeking necessary approval.

2.6.5  The demurrage on vessels on account of pre-berthing detention and detention before commencement of the discharge at the ports is borne by the DOF.

3.0 Handling of Imported Urea by Handling Agencies at Indian Ports

3.1 Handling of Imports :

3.1.1  On arrival of vessels at the nominated Indian ports, urea imports are handled by agencies appointed by GOI every year on contract. The handling agencies are also responsible for undertaking the distribution in accordance with the allocations made for each crop season under the Essential Commodities Act (ECA), 1955 by the Department of Agriculture and Cooperation (DAC) and the movement orders issued individually in the case of each shipment by DOF.

3.1.2  Prequalification of the handling agencies is made by the DOF as per the procedure outlined at Part I, of Annexure ‘B’. The prequalification is for a period of three years. Currently, there are 22 pre-qualified agencies whose details are at Part II, in Annexure ‘B’.

3.1.3  The DOF invites tenders from pre-qualified handling agents for the handling of urea vessels at the ports, bagging, standardisation, transportation, distribution and marketing of imported urea in the various States/UTs within the country on an annual basis.

3.2 Inland Transportation & Delivery of Imported Urea

3.2.1  This is payable in two stages :

a.   75% inland freight is adjusted by the handling agency at the time of establishment of the irrevocable LC. (the detailed procedure for establishment of Letter of Credit towards the cost of Cargo is at Annexure ‘C’.

b.   The balance 25% of the inland freight is reimbursed on submission of Debit Note by handling agents after completing the actual movement of the cargo.

3.3 Miscellaneous expenses reimbursable to the handling agencies

3.3.1 The expenses reimbursed on actuals by the DOF to the handling agencies as per the Handling & Distribution Contract are :

(i) Cargo related berth hire charges, priority ousting priority berthing charges, as payable by the charterers/consignees on their agents.

(ii) Turnover tax.

(iii) Additional ICC on stock-flow basis for the quantities handled during the financial year but which were not covered by the ECA allocation or remained unsold.

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                                                                          Annexure ‘A’

Part – I

I. The supporting documents required for processing of payment to canalising agencies

(A)    98% advance payment :

a)  Copy of contract

b)  A certificate from the bank in support of the opening of the Letter of Credit by the canalising agency in favour of the foreign supplier;

c)  Certificate from banker that no credit facility has been availed against the L/C;

d)  Confirmation of the fixture of the vessel, quantity loaded and lay days of the vessel at the loadport.

(B)   Balance 2% payment :

a)  Bank advice for full payment to foreign supplier in US$ with relevant exchange rate

b)  Copy of B/L invoice

c)  Supplier’s invoice

d)  Certificate of origin and

e)  Pre-shipment inspection report

f)   Storage plan

              It is mandatory for the canalising agency to submit the balance 2% bill within 30 days from the date of drawal of 98% advance payment failing which canalising agency is liable to pay interest at the commercial rate of interest from the 31^st day till the date of submission of the certificates.

Part – II

II.   The documents required for ocean freight payment

(A) Advance 90% freight payment :

a)   Transchart Authorisation confirming date and time of arrival of vessel.

b)   Copy of bill of lading

c)   Copy of Debit Note

d)  Copy of important provision of C/P Agreement

e)  Sailing advice

f)   Copy of purchase contract.

(B)   Balance 10% freight :

i)   Transchart authorisation

ii)   Copy of debit note

iii)  Copy of bill of lading

iv)  Charter party agreement

v)   Statement of facts at loadport

vi)  Notice of readiness

vii) Port trust authorisation certificate

viii) Exchange control copy of bill of entry

ix)  Time sheets.

The owners are to confirm the receipt of funds within 10 days from the remittance of initial and final payments.

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                                                                  Annexure ‘B’

Procedure for Prequalification of Handling Agencies

Part – I

        Agencies are pre-qualified by the DOF on the basis of response to national advertisement for a period of 3 years. The criteria for pre-qualification as it is in force currently are :

i)   The bidder should have experience of handling 1 lakh MTs of imported bulk urea in any of the Indian ports during any of the preceding five calendar years.

ii)  It should have experience of transporting and marketing mass consumption articles of the value of at leat Rs. 50 crores in a year.

iii) It should have a sound financial background and should be able to organise credit facilities of at least Rs.25 crores with any of the scheduled Indian banks. It would be an added qualification if the average credit facilities availed of during the last three years is not less than Rs.25 crores.

          The supporting documents which are required to be furnished alongwith the application for pre-qualification are documentary evidence of the bulk cargo handled during last 5 years, marketing of mass consumption goods, copies of the sales tax assessment orders and audited accounts for the last three years, bank solvency certificate for minimum Rs.25 crores, evidence of cash credit limits extended, income tax assessment orders and list of clients to verify the authenticity.

Part – II

List of pre-qualified handling agencies for 1998-2001 :

Public Sector

1.  Fertilizers & Chemicals Travancore Ltd.

2.  Hindustan Fertilizer Corpn. Ltd.

3.  Madras Fertilizers Ltd.

4.  Rashtriya Chemicals & Fertilizers Ltd.

5.  Pyrites, Phosphates & Chemicals Ltd.

6.  Paradeep Phosphates Ltd.

Cooperative Societies

1.  Indian Farmers Fertilizers Cooperative Ltd.

State Govt. Company

1.  Godavari Fertilizers & Chemicals Ltd.

Private Sector

1.  M/s Indian Potash Ltd.

2.  Indo Gulf Fertilizers & Chemicals Corpn.

3.  Chambal Fertilizers & Chemicals Ltd.

4.  Mangalore Chemicals & Fertilizers Ltd.

5.  Shriram Fertilizers & Chemicals Ltd.

6.  Southern Petrochemicals Inds. Corpn. Ltd.

7.  Deepak Fertilizer & Petro Chemicals Corpn. Ltd.

8.  Zuari Agro Chemicals Ltd.

9.  EID Parry (I) Ltd.

10. Coromandal Fertilizers Ltd.

11. Nagarjuna Fertilizers & Chemicals Ltd.

12. Duncan Industries Ltd.

13. Gujrat State Fertilizers & Chemicals Ltd.

14. Gujrat Narmada Valley Fertilizers Co. Ltd.

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                                                                                     Annexure ‘C’

Procedure for establishment of Letter of Credit

LC is established by the handling agency after deducting lump sum charges quoted for handling port charges, ICC for 2 months and 75% of the inland freight charges based on movement plan besides port dues from the total amount worked out on the cargo carried by the vessel in accordance with the B/L quantity. This is computed at the pool issue price of urea prevalent on that date.

The handling agencies is required to handle imported fertilizers on the basis of ownership of the material. The ownership is transferred to the handling agency while the vessel is on high seas. The handling agent is required to establish an irrevocable Letter of Credit (valid for 3 months) for the B/L quantity through a scheduled bank at New Delhi in favour of the DOF within 3 working days from the date of issue of Movement Order or a maximum of 10 days from the date of issue of nomination cable of the vessel, whichever is earlier. In the event of handling agency fails to comply with it, DOF will levy liquidated damages (LD) @ Rs.25,000/- per day. The delay beyond the commencement of discharge is charged at penal rate of interest.

The LC is encashed on the 30^th day from the date of completion of discharge of the vessel except where the Joint Draught Survey Report indicates a difference of more than +/- 1% over the quantity shown in the Bill of Lading. For the difference exceeding 1% B/L quantity, the handling agencies are required to furnish the equivalent value of quantity received in excess at the pool issue price. The DSR/Port outturn report is required to be submitted invariably to the DOF by the handling agent, along with the Statement of Facts (SOF) and time sheet within 30 days after completion of discharge of the vessel.