Government is likely to cut the subsidy on phosphatic and potassic (P&K) fertilisers such as di-ammonium phosphate (DAP) and muriate of potash (MoP) by Rs 2,000-2,700 a tonne on account of weakening of global prices.
“Fertiliser Ministry is expected to reduce the subsidy on DAP by Rs 2,000 per tonne to Rs 12,350 a tonne and that on MoP by Rs 2,700 per tonne to Rs 11,700 a tonne for the 2013-14 fiscal,” an official said.
Under the nutrient based subsidy (NBS) regime introduced on April 1, 2010, retail prices of 22 varieties of P&K fertilisers have been freed, but, the government reimburses companies the difference in cost of selling these soil nutrients at lower price to farmers.
In the current fiscal, which ends this month, government had fixed subsidy on DAP at Rs 14,350 per tonne and on MoP at Rs 14,400 a tonne. Subsidy on DAP and MoP for the 2011-12 fiscal was at Rs 19,763 and Rs 16,054 per tonne, respectively.
“The decision to cut subsidy on these crop nutrients was made on account of falling global prices of DAP and MoP. The subsidy is benchmarked against international prices. So, if global rates are coming down, subsidy too have to be cut,” the official added.
Another ministry official said the new subsidy rates, to be applicable for 2013-14, are subject to Cabinet clearance, which will be taken up before April 10th.
The government’s fertiliser subsidy bill has shot up due to a weak rupee and rise in global prices of DAP and MoP during the first two quarters of this fiscal.
Last week, Minister of State for Chemical and Fertilisers Srikant Jena told Parliament that budget estimates for fertiliser subsidy in 2012-13 was Rs 65,874 crore. Against a projected requirement of Rs 1,02,207.38 crore, the Revised Estimates (RE) allocated is Rs 70,628 crore.
There is likely to be a carry over liability to the extent of shortfall of funds based on the actual requirement and funds made available under RE, he had said.
India imported 78.64 lakh tonnes of urea till February of this fiscal, against 78.34 lakh tonnes in the entire previous financial year. During April-February period of 2012-13 fiscal, import of DAP stood at 57.79 lakh tonnes and that of MOP at 18.14 lakh tonnes.
On an average, India consumes about 30 million tonnes of urea and around 25-26 million tonnes of DAP, MoP and complex fertilisers annually.