India’s fertiliser subsidy expenses could touch Rs 2 trillion in 2022-23 because of a sharp spike in global prices of urea, di-ammonium phosphate (DAP) and muriate of potash (MoP) in the last one year, an official with the fertiliser ministry said on said.
The fertiliser subsidy was at Rs 1.6 trillion in 2021-22.
According to the ministry data, imported urea prices have risen by more than 145% to $930 a tonne in April 2022 from $380 a tonne a year ago. Similarly, prices of DAP and MoP have risen by 66% and 116% to $924 a tonne and $590 a tonne in April 2022, respectively, comparison to the year-ago period.
It would be the third year in a row in 2022-23 that the annual Budget spending on fertiliser subsidy will be much above the Rs 1-trillion mark, against a lower range of about `70,000-80,000 crore in the past few years.
The official said that the futures prices of imported fertiliser could depend on the Russia-Ukraine conflict, which has disrupted the supplies of DAP and MoP. “We could see a sharp spike in fertiliser subsidies this fiscal,” the official told FE.
However, the official stated that there will not be any fertiliser shortage in the upcoming kharif sowing season. “In case the Ukraine-Russia conflict persists, there could be a shortage of fertiliser in the rabi sowing season,” an official said.
According to official estimates, against fertiliser requirement of 35.43 million tonne (MT) during the 2022 kharif season, availability would be 48.55 MT, including 10.47 MT of imported fertiliser and 25.47 MT of domestically produced soil nutrients.
While farmers in the country continue to be insulated from the relentless rise in global prices of urea and natural gas, as the retail prices of the nitrogenous fertiliser are capped and subsidy on it is open-ended, the surge in DAP and MoP prices in the global markets inflates the farmers’ costs as the subsidy on the two products, although high, are capped.
In the case of urea, farmers pay a fixed price of Rs 242 per bag (45 kg) which covers about 20% of the cost of production, the balance is provided by the government as subsidy to fertiliser units.
With retail prices of DAP and MoP rising steeply since November 2021, the Cabinet is expected to announce a sharp increase in the nutrient-based subsidy (NBS) on these fertilisers this week in order to reduce the cost of the key farming inputs to farmers, ahead of the kharif sowing season. The new NBS rate will be applicable from April 1, 2022. In 2021-22, the government had twice revised NBS rates for phosphatic fertilisers.
India meets about 75-80% of the volume of consumption of urea from domestic production while the rest is imported from Oman, Egypt, the UAE, South African and Ukraine.
Nearly half of its DAP requirement are imported via (mainly from West Asia and Jordan) while the domestic MoP demand is met solely through imports (from Belarus, Canada and Jordan, etc).