Freight increases caused by the Red Sea disruptions may have inflated fertiliser subsidy bill for the current fiscal by a “few thousand crores”, Union minister for chemicals, fertilisers Mansukh Mandaviya said on Wednesday. However, the subsidy expenditure on soil nutrients in the current fiscal would still be around Rs 1.8 trillion, as against the total outlay of Rs 1.88 trillion.
The Budget Estimate for fertiliser subsidy in the current fiscal year is Rs 1.75 trillion, but an additional Rs 13,351 crore was allocated via supplementary demand for grants in the winter session of Parliament.
The decline in global prices of social nutrients and lower imports of urea have enabled the government to curb the subsidy. “Subsidy is expected to be lower this year because of the fall in global prices. We have not increased retail prices to reduce subsidies,” the minister said.
On the red sea crisis, Mandaviya said that freight rates have gone up by nearly 600%.
“External affairs ministry is making necessary interventions and the Indian Navy is giving protection to Indian cargo vessels,” Mandaviya stated.
For FY25, the government is likely to earmark Rs 1.75 trillion under the subsidies for the soil nutrients
In FY23, the fertiliser subsidy was at a record Rs 2.54 trillion because of a spike in global prices majorly attributed to the Ukraine-Russia conflict which disrupted supplies.
When the global rates skyrocketed during the last fiscal, Mandaviya said, the government increased subsidies and kept the retail prices of urea, di ammonium phosphate (DAP) and other fertilisers to protect farmers interest.
Global prices of DAP fell by 110% to $ 454/tonne in June, 2023 from a record high of $ 954/tonne in April, 2022. However, the price of critical soil nutrients has risen to $ 535/tonne last month.
The government has projected the country’s urea imports are estimated at 4 – 5 million tonne (MT) in the current fiscal, a decline from around 7.5 MT imported in FY23, helped by higher domestic production and increased use of nano liquid urea. I
India meets about 75-80% of the volume of consumption of urea of around 36 MT annually from domestic production while the rest is imported from Oman, Egypt, the Unite Arab Emirates, South African and Ukraine.
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).
In terms of volume, imports account for a third of domestic soil nutrients consumption of around 60 MT annually.
Since March, 2018, the retail urea price has remained unchanged.The scheme allows retail prices of the key soil nutrient to farmers to be kept at 242 per bag of 45 kg, even as the current cost of production is around Rs 2,200/bag.
The government announces nutrient-based subsidy rates for phosphatic and potassic fertilisers for kharif and rabi seasons annually.
The government releases the fertiliser subsidy to manufacturers, which sell their produce to farmers through their retail chains. Since October 2016, the subsidies have been released to the farmers with the use of point of sale (PoS) devices installed at around 0.2 million outlets. Since March 2018, beneficiaries have been identified through Aadhaar number, Kisan Credit Card and other documents
