Finance minister P Chidambaram has made a provision of Rs 31,000?crore as fertiliser subsidy for 2008-09 as against Rs 22,451 crore in the last budget. Another Rs 14,050 crore was allocated under supplementary demands, taking the total to about Rs 36,000 crore under the head. Of this, Rs? 7,500 crore was given as fertiliser bonds. This is much below the expectations of? the department of fertilisers (DoF), which has projected the actual?fertiliser subsidy spend at Rs 64,000 crore. The department had projected an actual spending of Rs 45,000 to Rs 50,000 crore for 2007-08. Indications are that this year too may see off-budget spending.
According to industry estimates, based on current annual supply levels,?the current supplies are much lower than the actual demand which are estimated at Rs 80,000 crore for 2008-09 with last year?s carry over of Rs 10,000 crore.
Reacting to this, a senior official of Fertilisers Association of India (FAI) said, ?The finance minister has? given a major relief?package to farmers; the allocation of subsidy to the fertiliser sector which provides key input for agricultural growth is negligible. It appears that it is a deliberate attempt to kill the industry? which is already under heavy stress due to sharp increase in the cost of inputs like gas, rock phosphate and increase in freight rates.
The move will also increase dependence on costly imports of fertilisers. During 2007-08, the country had to shell out about $1.5 billion on fertiliser imports.
The price of phosphoric acid, a key input to DAP, has gone up from $900 to $1,500 a tonne. Farmgate prices of imported urea and DAP stood at Rs 17,000? per tonne and Rs 27,000 per tonne respectively compared to Rs 12,000 a tonne and Rs 19,000 per tonne for domestic counterparts. The weighted average farmgate price of urea from gas-based units is still lower at about Rs 9,000 crore.
However, this has failed to impact demand. The country imported 4.7 million tonne of urea in 2006-07. Imports of urea during the current fiscal is estimated at 6.7 million tonne. Import of DAP has shot up from a meagre 861,000 tonne in 2000-01? to 2.88 million tonne last fiscal. It is expected to shoot up further to about 3.2 million tonne in 2008-09.