The move may save the government around Rs. 5,000 crore

The Union Cabinet, on Wednesday, gave its go-ahead for slashing the subsidy on phosphatic and potassic (P&K) fertilisers for this fiscal.

The move is expected to save the government around Rs. 5,000 crore.

The decision to cut subsidy has been taken in view of falling global prices.

Despite the reduction in subsidy, the government is hopeful that the maximum retail price (MRP) of di-ammonium phosphate (DAP) and Muriate of Potash (MoP) would come down by Rs. 1,500 and Rs. 1,000 per tonne, respectively.

“The Cabinet has taken a very important decision on P&K fertilisers. The total subsidy outgo for P&K fertilisers for 2013-14 will be lower by 15 per cent because of decline in global prices. Actually, outgo of subsidy cost will depend on consumption,” Finance Minister P. Chidambaram told reporters after a Cabinet meeting.

The Fertiliser Ministry estimates the subsidy on P&K fertilisers to come down by Rs. 4,500-5,000 crore to around Rs. 27,500 crore in this fiscal. The government has been implementing the NBS policy on P&K fertilisers since April 2010, under which it announces a fixed subsidy for 22 grades of P&K fertilisers and their MRP is freed.

Mr. Chidambaram said the subsidy on nitrogen had been reduced to Rs. 20.875 per kg from Rs. 24 per kg last year. Similarly, the subsidy for phosphate had been cut to Rs. 18.679 per kg from Rs. 21.804 per kg last year, while the subsidy on potash had been slashed to Rs. 18.333 per kg from Rs. 24 per kg. However, the subsidy for sulphur has been kept unchanged at Rs. 1.677 per kg for this fiscal. “This subsidy will be the lower than the rates approved for 2012-13. As a result, subsidy on DAP will be Rs. 12,350 per tonne, and on MoP it would be Rs. 11,300 per tonne,” he added.

The Fertiliser Ministry would put in place a mechanism to ensure that a lowered MRP is fixed by manufacturers , he added.

“If there is any violation or contravention, there will be a monitoring mechanism which will take corrective steps to ensure that the benefit is passed on to farmers,’’ he said. The country requires around 29-30 million tonnes of DAP, MoP and complex fertilisers. The bulk of this requirement is imported.

According to the NBS policy, the government announces NBS rates for various nutrients, namely nitrogen , phosphate , potash and sulphur , for P&K fertilizers covered under the policy every year.

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