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You may have heard about management manipulation, but have you ever come across the term “bureaucratic manipulation”? Manipulation refers to actions by an individual or a small group to unfairly influence or adapt a situation to suit their purpose or advantage. While manipulation is a common occurrence in corporate management—often involving unfair decisions to benefit specific segments or the company as a whole—it is unusual and exceptional in government departments. Such practices in a government setup are not only rare but also detrimental to national and public interest. Manipulative actions in bureaucratic decisions amount to corrupt practices, requiring urgent and stringent action against the responsible officials.
Manipulative Practices in the Department of Fertilizers Leading to the Misappropriation of Thousands of Crores from the National Exchequer
In India, the Central Government disburses cost-based subsidies to urea manufacturers operating within the country. A uniform selling price for urea is determined and then notified nationwide, with manufacturers then producing and selling urea at the government-mandated Maximum Retail Price (MRP) throughout the nation. The government while determining this subsidy, calculates the cost of production, known as the “Concession Price”, individually for each manufacturer, which also includes a reasonable post-tax profit margin of 12%. The subsidy disbursed to manufacturers equals the difference between the Concession Price and the net realization from market sales.
Since the introduction of the subsidy scheme in 1977, the cost of production has consistently been determined in Indian currency (INR), and subsidies have also been paid accordingly. Currently, 30 urea manufacturing units, producing approximately 24 million metric tons (hereinafter “MT“) of urea annually, receive these subsidies based upon costs determined in Indian currency i.e., INR.
However, for five manufacturing units covered under the New Investment Policy, 2012, who produce about 6.35 million MT of urea annually; the Department of Fertilizers are now paying subsidies in U.S. Dollars (USD)—a departure from standard practice. In these cases, the production cost is first calculated in INR, converted to USD to determine the subsidy, and then reconverted to INR for payment. This process of double conversion in effect causes the Department of Fertilizers in unduly overpaying subsidies to these manufacturers.
In the determination of cost of production for these five units, the fixed exchange rate is initially calculated in INR and then that cost is converted to USD. The Fixed conversion cost was determined by the Government at INR ₹7,750/MT, which was then converted at a fixed exchange rate of INR ₹50 per U.S. Dollar (USD), resulting in the cost of production for urea production surging up to U.S. $155/MT. Ironically, the variable energy cost continues to be computed in Indian currency (INR) but during conversion into USD, the current INR-USD FOREX (exchange) rate is employed, instead of the fixed rate of exchange of INR ₹50/US$. Since the fixed cost of USD $155/MT is reconverted to INR at the prevailing exchange rate of INR ₹84.40/USD, the Department of Fertilizers ends up paying out INR ₹13,082/MT in a total during disbursement of subsidy to these urea manufacturers.
This discrepancy leads to an excessive subsidy overpayment of INR ₹5,332/MT to these five urea manufacturers in the country. Thus, an excess and unusual sum of INR ₹5332/MT is syphoned off directly from the National Exchequer to extend undue enrichment to these urea manufacturers.
For a urea plant producing 1.27 million MT annually, this excess in subsidy payments totals ₹676.91 crore each year. Across all five units, the undue subsidies amount to approximately ₹3,385 crore annually. Since this process began in 2019-20, it has caused a cumulative loss of at least INR ₹25,000 crore to the National Exchequer over the last five years.
While the conversion and reconversion of variable energy costs at current exchange rates have no financial impact, the fixed cost conversion at INR ₹50/USD and reconversion at the prevailing rate significantly increases the government’s subsidy burden. This deliberate manipulation by the Department of Fertilizers has funneled thousands of crores from public funds into the hands of a few private manufacturers.
The scale of the financial loss to the public exchequer is suggestive of the possibility of kickbacks. An independent investigation is urgently needed to determine the extent of misappropriation. Notably, it is particularly concerning that this malpractice persisted even after some officials in the Department of Fertilizers flagged the issue to the highest authorities, implying the involvement of senior bureaucrats in this corrupt scheme.
Need of the Hour
While manipulation in management is common, bureaucratic manipulation at the highest level is both rare and unprecedented. Such actions constitute a breach of trust by the bureaucracy against the public and the nation. Immediate attention from the government and investigative agencies is required to stop this ongoing misappropriation of public funds. Erring officials must be held accountable and brought to justice.
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