Govt to revise fertiliser subsidy to bring down prices

NEW DELHI: The central government is set to raise the subsidy on fertilisers for the kharif crop season to cool prices for farmers “as a special case”, the department of fertilisers said on Tuesday as worries over protracted disruptions in key commodities continued to rattle global markets.

The fertiliser department said in a presentation that international prices of fertilisers and raw materials have been constantly rising since January 2021. “An inter-ministerial committee recommended revision of nutrient-based subsidy rates for nutrients nitrogen, phosphorous, potassium and sulphur for kharif 2022 based on average international prices of fertilizers in March 2022 as a special case this year… Cabinet approval on nutrient based subsidy rates for kharif 2022 is awaited,” showed the presentation made at the National Conference on Agriculture for Kharif Campaign 2022-23 organised by the agriculture ministry on Tuesday.

Assurance of revised subsidy in line with the surge in global prices is expected to calm the market. Once announced, the new subsidy rates will be applicable from 1 April, the presentation shared by the agriculture ministry showed.

In the case of non-urea fertilisers like phosphorous and potash, the subsidy component is fixed, which means that unless the subsidy is increased, an increase in cost would translate to the retail price paid by the farmer.

Industry executives said that announcing the new subsidy rates in time would be vital for importers to tie up contracts. Besides, even though phosphorous and potash fertiliser prices are ‘decontrolled,’ often policy makers expect businesses to keep prices steady in times of volatility, which makes it important to announce the subsidies in time.

“However, kharif demand picks up during July-august and there is still time,” said an industry executive who asked not to be named. Reduction in phosphorous exports from China had contributed to a price surge globally even before the Russiaukraine war, which got aggravated subsequently, said the executive.

While an increase in the subsidies will push up the Centre’s fertiliser subsidy outgo for the current fiscal, estimated at over ₹1 trillion, it is likely to address food inflation. Retail inflation measured by the Consumer Price Index (CPI) has already scaled 6.95% in March, while food inflation touched 7.68%, showed official data. The RBI had said earlier this month that concerns over protracted supply disruptions have rattled global commodity and financial markets, given the significant share of the two economies engaged in war—russia and Ukraine--in global production and exports of key commodities like oil and natural gas, wheat and corn, palladium, aluminium and nickel, edible oils and fertilisers.