Fertiliser smuggling across India?s porous borders, especially with Nepal and Bangladesh, has become the latest menace that threatens to upstage narcotics and cash from their prime position at the top of the list. The most serious implication of this is the impact on the government?s annual subsidy bill that has ballooned to almost 10% of its total expenditure.
The attraction is the huge price differential between the heavily subsidised indigenous fertilisers and prices in other South Asian countries where fertilisers are not subsidised. Top government sources said this has made smuggling products such as DAP out of India a thriving business in addition to the under invoicing of imports of muriate of potash.
?In 2008-09, the international price of diammonium phosphate or DAP (a commonly used fertiliser) was Rs 60,000 per tonne while it was available at Rs 9,300 a tonne in India. Such price differential offers incentive for smuggling fertilisers out of the country as there is no concept of fertiliser subsidy in the neighbouring region,? a senior government official said on the condition of anonymity.
?In 2008-09, Nepal consumed 300,000 tonne fertilisers. This entire consumption was met by fertilisers smuggled from India. In 2008-09 (the year in which India?s fertiliser subsidy bill went up to about Rs 1 lakh crore), the problem was acute because of the huge price differential. This year it is likely to be less,? said an industry representative and a member on the board of a leading fertiliser company, who, again, asked not to be named. This year, DAP price has come down in global markets to about Rs 25,000 a tonne while it is available in India at around Rs 9,900. The price difference is still high.
On Thursday, minister of state for fertilisers Srikant Kumar Jena admitted in Parliament there were reports of fertiliser smuggling from India to neighbouring countries. The home ministry has alerted agencies like the Border Security Force, the Indo-Tibeten Border Police, Coast Guard and Assam Rifles to maintain strict vigil on the borders to curb smuggling.
The home ministry has also asked chief secretaries of 14 border states to sensitise authorities to curb possible smuggling, the minister said. State governments, including West Bengal, Assam and UP, have been advised about ?smuggling of fertlisers across international borders? at a recent meeting with state ministers on food security. In 2008-09, fertiliser producers received a budget subsidy of Rs 75,849 crore and another Rs 20,000 crore through bonds, which was not part of fiscal deficit calculations. Since natural gas is a feedstock for fertiliser plants, their cost of production rises when gas price goes up in line with the global crude oil price. This necessitates higher subsidy to make the product affordable for farmers. (About 80-90% of subsidy is given to the producer based on the statutory auditor?s certification of sale and the rest is given after the state government endorses. But there is no way to ensure that the fertiliser sold is used for farming.)
According to a senior official of the Fertiliser Association of India, ?Fertiliser price in India is extremely low. Even the increase in the price of urea this year is very nominal. Considering the price difference, smuggling could be possible. However, we do not have any confirmation on this.?
Policymakers say curbing the problem is not easy. Restriction on sale of fertilisers to farmers may not help as it could always be re-sold. Besides, farmers themselves could be party to the crime. While introducing the nutrient-based subsidy scheme earlier this year, the government had considered giving subsidy directly to farmers instead of selling subsidised fertilisers in the market. However, there is no certainty that the farmer would use the money for buying fertilisers. Identifying farmers is also a major difficulty. ?We cannot go by land ownership as 10% land ownerships change every year. Besides, land is often handed over to landless farmers for farming. Thus, subsidy given to land owners may not reach the actual farmer,? said a person who was party to the deliberations.