Govt hikes nutrient-based fertiliser subsidy for Kharif season

In 2020-21 too, the government had to hike the NBS subsidy steeply given the surge in imported fertiliser prices.

fertiliser price
Last year's NBS subsidy included Rs 28,495 crore for the Kharif and Rs 28,655 crore for the Rabi season.

The government on Wednesday said the Nutrient Based Subsidy (NBS) rates for phosphatic and potassic (P&K) fertilisers for the Kharif season (April-September, 2022) will be Rs 60,939 crore, as against Rs 57,150 crore for the whole of last year. The increase in subsidy is meant to insulate farmers from the increases in the prices of di-ammonium phosphate (DAP) and other non-urea nutrients in the global markets. These soil nutrients are largely imported.

Last year’s NBS subsidy included Rs 28,495 crore for the Kharif and Rs 28,655 crore for the Rabi season.

In 2020-21 too, the government had to hike the NBS subsidy steeply given the surge in imported fertiliser prices.

Increase in NBS rates for Kharif season, coupled with an expected rise in urea subsidy due to the elevated prices of both urea and LNG in the global markets could raise India’s fertiliser subsidy expenses in 2022-23 to over Rs 2.2 trillion in FY23, analysts say.

Budgeted fertiliser subsidy was at Rs 1.6 trillion in 2021-22.

Retail prices of phosphatic and potassic (P&K) fertilisers, including DAP were ‘decontrolled’ in 2010 with the introduction of a ‘fixed-subsidy’ regime as part of NBS mechanism. However, the subsidy on DAP saw an increase to 60% of cost in FY22, from a little over 30% previously.

However, the prices have continued to rise in the global markets even after the subsidy hike. As a result, from a level of Rs 18,000/tonne in November, the retail price of MoP has risen to the current level of Rs 32,000/tonne. Similarly, the DAP now costs Rs 27,000/tonne to Indian farmers as against Rs 24,000/tonne in November last year.

New NBS rates will be applicable from April 1, 2022. In 2021-22, government had twice revised NBS rates for phosphatic fertilisers.

The cabinet committee on economic affairs (CCEA) has approved a proposal of fertiliser ministry by providing subsidy of Rs 2,501 per bag (50 kg) on DAP for kharif 2022 as against existing subsidy of Rs 1,650 per bag.

It implies the farmers would get DAP at the Rs 1,350 per bag, while the actual cost is Rs 3,851 per bag. The subsidy support provided by the government is for indigenous fertilizer (SSP) through freight subsidy and additional support for indigenous manufacturing and imports of DAP.

“Increase in the international prices of DAP and its raw materials have been primarily absorbed by the Union Government,” an official statement said. The statement noted that the increase in the prices of DAP & its raw material in the last one year is around 80%.

An inter-ministerial committee recently recommended revision of nutrient-based subsidy rates for nutrients such as nitrogen, phosphorus, potassium and sulphur for kharif 2022 based on average global prices of fertilizers in March 2022.

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, compared 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 Rs 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.

However, fertilizer ministry officials have stated that there will not be any fertilizer 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.

 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.

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 requirements 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).

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 28-04-2022 at 04:00 IST