Page 468 - MANUAL OF SOP

General Issues

industry could reasonably count on under normal conditions of competition, in the
absence of the dumped imports.

Practice followed by Fertilizer Ministry in determination of Reasonable Return:
19.25.5. The Policy Parameters for the 7 (from 1.7.1997 to 31.03.2000) and 8
th
th
(from 1.4.2000 to 31.3.2003) Pricing Periods indicate that the fertilizer Ministry has
been allowing a return of 12% with notional income tax rates.

Return On Net Worth
19.26. Post-tax return on the net-worth, which comprises equity and free reserves
for the urea activity only, under the existing system of priority on the balance
outstanding as on 30.06.1997 for the 7 pricing period, and as on 31.03.2000 for
th
the 8 pricing period, would be considered at 12 per cent.
th
19.27. In respect of new grass-roots and expansion units (wherever final/provisional/
adhoc retention price has been notified), the free reserves would be treated as
equity from the date of commercial production.

19.28. The method of calculation of return on net-worth on the basis of notional
tax liability subject to adjustment of actual rate of corporate tax notified by the
Government on year to year basis and at the rate of return of 12 per cent shall
continue for the 7 and 8 pricing periods. Should there be a change in the method
th
th
in favour of adoption of actual tax in place of notional tax, the same shall be adopted
as and when decided upon.

19.29. However, the Fertilizer Ministry also allowed the nominal percentage
as Vintage Allowance to old plants for a small period. This may have merit to
compensate for the lower depreciation amount in old plants.

Practice followed by Ministry of Finance in determination of Reasonable
Return:
19.30. Department of Expenditure, Ministry of Finance considers 12% post tax
return on net worth for determination of fair prices. However, interest is generally
paid on actuals subject to verification and justification in these cases;

19.31. It is important to note that all the practices cited above are in the context
of fixation of prices or return to specific industry. The purpose of ascertaining a
rate of return in the anti-dumping context is only to ensure that there is no over-

445