The global fertiliser prices saw a sharp spike since early 2022, triggered by Russia-Ukraine conflict, leading to supply disruptions and a sharp rise in India’s fertiliser subsidy in the current fiscal.
In August, the government announced ‘one nation, one fertiliser’ policy by introducing a single brand name for urea and other fertilisers. From January 1, 2023, a common logo indicating fertiliser subsidy scheme Pradhanmantri Bhartiya Janurvarak Pariyojna will be used in all fertiliser bags.
Given that imports account for a third of domestic soil nutrients consumption, a sharp spike in prices of liquefied natural gas (LNG) was a major headache for policy-makers.
Minister for fertilisers Mansukh Mandaviya has made it clear that the government would not pass on the burden of rise in global prices to farmers. 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.
Officials said ‘one nation, one fertiliser’ policy would help increase the availability basket of fertilizers, address the dilemma among farmers in choosing from the plethora of brands available in the markets, reduce the crisscross movement and ensure timely supplies.
Industry sources said higher global prices of soil nutrients are seen to inflate fertiliser subsidies to an all-time high Rs 2.3-2.5 trillion in 2022-23, up from Rs 1.6 trillion in the last fiscal. 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.
Rating agencies – ICRA and Crisil –have pegged the government’s fertiliser subsidy to cross Rs 2.5 trillion in the current fiscal. “Amid the Russia-Ukraine conflict, the price of pooled gas has risen by more than 10% quarter-on-quarter in September 2022,” Naveen Vaidyanathan, director at Crisil Ratings, said.
The urea units use pooled gas, which comprises domestic gas and imported liquefied natural gas, a policy which had been formulated since May, 2015 by the petroleum ministry. The pooled gas price in October 2022 was around $ 25 million metric BTU (mmbtu) and has jumped by almost two and half times in the last 18 months.
According to an official with Fertiliser Association of India (FAI), the LNG pooled prices were in the range of $ 10-12/mmbtu one and half years back.
Imported urea prices have risen by more than 150% to $1,000 a tonne in December 2021 from $400 a tonne in April, 2021. In October, 2022, imported urea prices are at $600 a tonne.
Global prices of DAP, which rose by 70% $ 945 a tonne in July 2022 from $ 555 a tonne in April, 2021, have since moderated. In October 2022, DAP prices were $ 722 a tonne.
However, there are some moderations in the global prices of fertiliser in the recent weeks. “The worst as far as high global fertiliser prices trend is over,” Arun Singhal, Secretary, Department of Fertilisers told FE.
Nearly half of country’s di-ammonium phosphate (DAP) requirements are imported via (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 case of urea, farmers pay a fixed price Rs 242 per bag (45 kg) against the current cost of production of around Rs 2650 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.
The government provides subsidies to companies, those who manufacture fertiliser and those who import soil nutrients on the basis of actual sale by the retailers to the farmers. Buyers identification is done through point-of-sale devices based on Aadhaar authentication and other documents.
Meanwhile, the government is aiming to increase the current annual production capacity of nano urea from 50 million bottles (550 ml each) to 440 million bottles by 2025, a plan which would help to end costly imports of the soil nutrient variety.