Pitching a strong case against the continuation of fertilizer subsidies, particularly on urea, the Economic Survey 2013-14 points out that subsidies burden leads to higher food prices while having “zero or negative” impact on agricultural output.
“Urea is highly subsidised. Farmers pay approximately Rs. 5,360 per tonne, and the government pays Rs. 11,760 per tonne,” it says.
“The correct proportions in which Nitrogen (N), Phosphorus (P), and Potassium (K) should be used are 4:2:1,” says the Survey. However, the skewed subsidy regime, resulting in farmers paying lesser for urea compared to phosphorus and potassium, had led to urea overuse.
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“As a consequence, fertilizer use in India is taking place in the ratio 8.2:3.2:1. For each unit of K, instead of 4 units of N, which are required, 8.2 units of N are being put into the soil. The incremental output of the excessive 4.2 units of N is zero or somewhat negative,” it points out.
India purchases about 50 lakh metric tonnes of excess urea, leading to farmers and the government wastefully spending Rs. 2,680 crore and Rs. 5,860 crore respectively.
“The distorted policy has also led to stagnation of private investment in the sector, especially in urea, and increased reliance on imports. The fertilizer subsidy hurts everyone — farmers, firms, taxpayers and consumers.”
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