Ministry cracks down on spurious fertiliser rackets

Fertiliser minister Mansukh Mandaviya on Tuesday said after inspection of 220 units which manufacture mixed fertilisers, 112 units have been ordered shut.

fertilizer, economy
Fertiliser subsidy in FY23 stood at an all-time high of Rs 2.53 trillion, owing to the spike in global commodity prices.

To curb diversion of highly subsidised urea for industrial use and manufacturing of spurious products, the fertiliser ministry’s flying squads recently conducted 370 surprise inspections across 15 states and Union Territories which covered units manufacturing soil nutrient varieties such single superphosphate (SSP) and NPK (nitrogen, phosphorus, potassium).

Fertiliser minister Mansukh Mandaviya on Tuesday said after inspection of 220 units which manufacture mixed fertilisers, 112 units have been ordered shut.

During inspection of 130 urea manufacturing units, the products of 120 were found to have neem oil content which is not permissible, Mandaviya said.

As per a government stipulation only subsidised agricultural grade urea is allowed to contain neem. The government has directed units to ensure 100 % neem coating on all subsidised agricultural grade urea in the country since 2015.

Networks involved in illegal manufacturing of fertilisers were busted in various states including Gujarat, Haryana, Rajasthan, Karnataka, Tamil Nadu, Bihar and Maharashtra

The fertiliser ministry has registered 30 FIRs for diversion of urea, and 70,000 bags have been seized in Gujarat, Kerala, Haryana, Rajasthan and Karnataka.

“Any illegal diversion of this highly subsidised urea meant for the farmers and agriculture for non-agriculture/ industrial purpose by many private entities results in shortage of urea meant for farmers,” according to a fertiliser ministry note.

In case of urea, farmers pay a fixed price of `266 per bag (45 kg) against the cost of production of around `2,550 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.

Of the total annual demand of 35 million tonne (MT) of urea, close to 29 MT is domestically produced and the rest is imported.

“For the first time, 11 persons have been jailed under prevention of black marketing and maintenance of supplies act for diversion and black marketing of urea in the last one year,” according to a fertiliser ministry note.

It stated that several other legal and administrative proceedings have also been exercised by states through essential commodities act and fertilizer control order.

Trade sources said that imported urea prices, which rose to $925/tonne in April 2022, had declined by 64% to $ 313/tonne in March, 2023.

Apart from being used as a vital crop nutrient, urea is used as a raw material in various industries such as resin or glue, plywood, crockery making and moulding powder units, cattle feed, dairy and industrial mining explosives.

Mandaviya said that the ministry is still assessing the likely impact of softening global prices on the subsidy on soil nutrients for FY24.

A sharp drop in global prices in recent months is likely to bring down the fertiliser subsidy in FY24 to lower than the budget estimate of Rs 1.79 trillion, after touching the record level of Rs 2.52 trillion in the last fiscal year.

Imports account for a third of domestic soil nutrients varieties consumption of around 60 MT annually.

Because higher global prices prevailed last year, the fertiliser subsidy rose by 56% to Rs 2.52 trillion in FY23 against Rs 1.62 trillion in 2021-22.

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First published on: 10-05-2023 at 03:50 IST