Finally we got a so-called nutrient-based fertiliser policy. This newspaper was the only one that reported it without adjectives and stuck to facts. Nitrogen (N)?urea or added on in NPK?is still controlled. Phosphorous (P2O5), added on in DAP, SSP and NPK, and potassium (K2O), available in MOP or added in NPK, as well as other nutrients, are now, in principle, market-based in their pricing and will be influenced by a limit on the subsidy to be given primarily on ?economic? considerations, to be determined by an inter-ministerial panel headed by the secretary (fertilisers).
Since the price of urea is controlled, this is not the classical nutrient-based pricing formulation. As the Report of the Working Group on Urea Policy recommended to promote the balanced use of fertiliser, different fertilisers must be priced according to their nutrient value. This was very important to me as I chaired that group and now its report is available for citation. It said, ?The per unit price of nitrogen in urea shall form the basis for all fertilisers.? It said so on account of the terrible long-term costs of excess use of subsidised nitrogen, which it documented. It summarised the available scientific evidence on all this and pointed out that the traditional prescription for application of the primary nutrients in the ratio of 4:2:1 has no scientific basis and is a historical formula whose origin is unclear. More recently, distinguished scientists in a technical meeting called by the National Academy of Agricultural Sciences (NAAS) under National Professor Rajendra Prasad repeated the agro-climatic evidence, said that the single ratio is bunkum, and described in great detail the agro-climatic ratios required, as in my group?s report. The fellows of the NAAS?I am one of them?are suitably chastened by the biotech business and will, I guess, keep quiet.
Forgetting the long-term concerns of agro-climatic sustainability, as commentators on short-term economic policies, the merit of what we have done after five years is first to underline that there are no free lunches. The price of urea is to be raised by 10%, and to work a nutrient-based policy we had recommended that urea prices should be aligned with improvement in the terms of trade in agriculture. Now, of course, in spite of all the exhortations of Dr Gulathi and IFFPRI, there is no subsidy to urea manufacturers in India, with the efficient ones meeting the costs of the inefficient ones and imports subsidised. Their quantities and, now again, prices are rising, so the price rise is well taken. The preferred policy of the Urea Working Group was a single long-term cost price and a defined policy for inefficient units to shape up or shut down. If done at that time, we could have moved over to a nutrient-based policy then. But we should do it now.
The second advantage of the new policy is to recognise that in P and K we don?t have the raw material base and efficient trade is the only option. A subsidy cap is justified in that sense and also from the long-term macro viewpoint. Without any counter-cyclical measures, I am not quite clear on what the idea is of not letting companies raise prices of P and K in a wildly swinging global commodity market. But I guess somebody will explain that when an attempt is made to change prices.
Will the new policy lead to better balances and newer products? Not controlling every imported batch and every dispatch will, I guess, help. I believe the more powerful incentives have already been given. In 2006, government should have announced the policy of balancing existing capacities by not price- controlling them, as recommended by the group I chaired. It took two years to do it but more than two million tonnes of capacity has been created since. The policy on specialty fertilisers and newer products, which also gives market-determined incentives, took the government more time to announce but now is fully in force. This segment of micro-nutrients, organics and items like water-soluble fertilisers is growing at a very high rate. I am happy because the policies recommended by my group five years ago are now working. They matter more than the current announcement, which can do no harm. But we still look forward to a single group in urea and a nutrient-based price, taking into account the limits the budget can afford. The market will then take off. Until then it would be prudent to accept that nutrients don?t come down in the rain.
The author is a former Union minister