Thanks to the sharp slump in the prices of farm nutrients in the global markets, the government?s fertiliser subsidy bill is set to come down sharply in 2009-10 over the previous year.
Expecting a further drop in cost of indigenous and imported fertilisers as well as decontrolled fertilisers, the Centre has lowered its budgetary provision towards fertiliser subsidy by 34.10% to Rs 49,980 crore for the current fiscal from the revised 2008-09 budget estimate of Rs 75,849 crore.
The lesser provision is also due to the below normal monsoon predicted by India?s meteorological department that would result in low demand of fertilisers.
The reduction of Rs 25,869 crore in the subsidy bill is in sharp contrast to the Rs 44,863 crore additional provisions made in the 2008-09 revised budget estimate, which was mainly on account of the higher economic cost of indigenous, imported and decontrolled fertilisers. The reduction in the fertiliser subsidy in the current fiscal has also helped the finance minister in bringing down the expenditure on fertiliser subsidy to 7.18% of the total non plan expenditure from 12.27% during the previous year. ?The overall cost of production of fertiliser has come down. Globally there has been a slow down in demand for fertilisers and the prices have declined. Going forward we don?t expect the prices to be too volatile and hence there is a lower provision for fertiliser subsidy,? said Satish Chander, DG, Fertiliser Association of India (FAI).
The finance ministry has earmarked Rs 9,780 crore as subsidy for indigenously produced urea while another Rs 5,947.94 crore for imported urea fertilisers. India mainly imports three varieties of fertilisers like urea, Di-ammonium phosphate (DAP) and muriate of potash. As only nitrogenous fertilizers are under price control, the subsidy estimates are based on the likely imports of urea during the year. While the demand for urea is 26 million tonne, only 20 million is produced domestically and 6 million tonne had to be imported during 2008-09. ?Though globally the demand has come down, we expect the domestic demand to remain almost the same level,? said Chander.
Meanwhile the government is also considering changing the fertiliser subsidy regime. The Budget 2009-10 stated that to ensure balanced application of fertilisers, the government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime. It will lead to availability of innovative fertiliser products in the market at reasonable prices.