P&K fertilisers: 140% hike in subsidy to cost govt Rs 15,000 crore

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June 17, 2021 4:15 AM

The Budget allocation for subsidy of P & K fertilisers for FY22 is Rs 20,720 crore against Rs 37,372 crore spent in FY21.

The Centre is committed to meeting the subsidy on fertilizers,  he said. (File)The Centre is committed to meeting the subsidy on fertilizers,  he said. (File)

The Cabinet committee on economic affairs (CCEA) on Wednesday approved a 140% increase in the subsidy on diammonium phosphate (DAP) for the ongoing kharif season, a move that could inflate the fertiliser subsidy bill for the current fiscal by Rs 14,775 crore. With this decision, the subsidy on DAP will rise to Rs 1,200/ bag or half the rate at which farmers buy the nutrient. Effectively, farmers will get DAP at the same rate as during last summer crop season, insulated from the spike in prices in the international markets.

The Budget allocation for subsidy of P & K fertilisers for FY22 is Rs 20,720 crore against Rs 37,372 crore spent in FY21. The total fertiliser bill for the current financial year is pegged at Rs 79,530 crore, against Rs 1.28 lakh crore, with urea being the most commonly used and the most subsidised fertiliser.

As prices of DAP and complex fertilisers had surged in the intentional market, some of the domestic fertiliser companies hiked prices of these crop nutrients for the summer season steeply. The move could have reduced the consumption of these fertilisers and thereby crop yields, unless the government intervened to soften the blow to farming community.

For over a decade now prices to the farmers of phosphatic and potassic fertilisers are to a large extent determined by the market as subsidies provided by the government are fixed. These fertilisers are mostly imported.

“Considering this crisis of pricing of DAP in India…, Gol has increased the subsidy rates under nutrient based subsidy scheme as a special package for farmers in such a way that MRP of DAP (including other P&K fertilisers) can be kept at the last year’s level till the present kharif season,” the government said in a statement. On May 19, a high-level meeting chaired by prime minister Narendra Modi had approved the new subsidy rates for DAP for the current kharif season.

The international prices of phosphoric acid, ammonia and other items used in DAP have gone up by 60-70% since late March. Prices of finished DAP in international market have also increased. Despite this sharp increase, DAP prices in India were initially not increased by the companies, but some companies later increased the prices beginning of this financial year. The government subsequently asked all the fertiliser companies to sell their old stocks of DAP at the old prices only.

The CCEA also approved “Deep Ocean Mission” with a view to explore deep ocean for resources and develop deep sea technologies for sustainable use of ocean resources. The estimated cost of the Mission is Rs 4,077 crore for 5 years.

In another decision, the Cabinet also approved introduction of inland water ways Bill in Parliament to regulate and develop the sector.

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