Ministry seeks extra Rs 30,000 crore fertiliser subsidy for Q4 | The Financial Express

Ministry seeks extra Rs 30,000 crore fertiliser subsidy for Q4

Subsidy on soil nutrients to be Rs 2.45 trillion in current fiscal.

fertiliser ministry, fertiliser, icra, crisil, subsidy
The Budget Estimate for fertiliser subsidy in the current fiscal year is Rs 1.05 trillion.

The fertiliser ministry has asked for an additional Rs 30,000 crore as subsidy allocation for the last quarter of the current fiscal, which would be in addition to Rs 2.15 trillion already allocated by the finance ministry for the subsidy on soil nutrients.

This will be over and above an additional fertiliser subsidy of Rs 1.09 trillion included in the net expenditure of Rs 3.26 trillion under the first supplementary demands for grants for the current fiscal  approved by Parliament in the winter session.  

The Budget Estimate for fertiliser subsidy in the current fiscal year is Rs 1.05 trillion. The subsidy requirements turned out to be much higher,  as the Ukraine war broke out unexpectedly, leading to a spurt in commodity prices, especially of fertilisers and feed-stocks like natural gas.  

Sources told FE that with the additional allocation of Rs 30,000 crore, the estimated subsidy for the soil nutrients would be a record in the range of Rs 2.45 trillion.

The subsidy on farm nutrients stood at Rs 1.6 trillion (revised estimate) in FY22.

It would be the third year in a row that the annual Budget spending on fertiliser would be above Rs 1 trillion mark, against a lower range of Rs 70,000 – 80,000 crore in the past few years.

Fertiliser minister Mansukh Mandaviya had stated last month that the government would not pass on the burden of rising global prices to farmers and ensure that there is not shortage of soil nutrients in the country.

Nearly half of country’s di-ammonium phosphate (DAP) requirements are imported mainly from West Asia and Jordan while the domestic muriate of potash (MoP) demand is met solely through imports from Belarus, Canada and Jordan etc. India also imports about 20% of its annual consumption of urea.

In terms of volume, imports account for a third of domestic soil nutrients consumption. The cost of production of urea in the country has witnessed a significant jump because of rise in liquefied natural gas (LNG) prices, a key raw material for manufacturing of urea.

However sources said that the fertiliser subsidy may decline in the next fiscal because of recent moderation in global prices. “However, the global prices of fertilisers have started to soften in recent times. The worst as far as high global fertiliser prices trend is over,” Arun Singhal, secretary, department of fertilisers, had told FE.

In case of urea, farmers pay a fixed price Rs 242 per bag (45 kg) against the cost of production of around Rs 2,650 per bag. The balance is provided by the government as a subsidy to fertiliser units

The retail prices of phosphatic and potassic (P&K) fertiliser, including DAP were ‘decontrolled’ in 2020 with the introduction of a ‘fixed-subsidy’ regime as part of Nutrient Based Subsidy mechanism announced by the government twice in a year.

The government provides subsidies to companies manufacturing fertiliser and those who import soil nutrients on the basis of actual sale by the retailers to the farmers

Rating agencies – Icra and Crisil – have pegged the government’s fertiliser subsidy to cross Rs 2.5 trillion in the current fiscal.

Prime Minister Narendra Modi recently stated the Central government has spent over Rs 10 trillion over the past eight years to ensure that farmers in the nation are not burdened by the high global fertiliser costs.

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: 18-01-2023 at 01:35 IST