India faces record fertilizer subsidy in 2021-22

The figure is almost double the amount budgeted for fertilizer subsidies in the Budget for this fiscal year ending on March 31.

Updated - December 01, 2021 12:19 pm IST

Published - December 01, 2021 12:18 pm IST - NEW DELHI:

Representatinal image only.

Representatinal image only.

India plans to increase 2021-22 fertilizer subsidies to a record of more than 1.55 trillion Rupees ($20.64 billion) ($1 = 75.1080 Indian Rupees) to avoid shortages amid a sharp increase in global prices of the chemicals, sources familiar with the issue said.

The figure is almost double the amount budgeted for fertilizer subsidies in the Budget for this fiscal year ending on March 31.

Comment | Reforming the fertilizer sector

India, the top importer of urea, is a major buyer of diammonium phosphate (DAP) needed to feed its huge agriculture sector which employs about 60% of the country’s workforce and accounts for 15% of $2.7 trillion economy.

The government provides financial support to companies such as National Fertilizer Limited, Madras Fertiliser Limited, Rashtriya Chemical & Fertilisers Limited, Chamabal Fertilsers & Chemicals Limited that sell fertilizers at below-market rates.

Global fertilizer prices have surged roughly 200% over the past year after record rises in the price of the two main energy sources – coal and natural gas – used to produce the crop nutrients and new export restrictions on fertilizers by China and Russia.

Also read | Sri Lanka partially lifts ban on chemical fertilizers; allows private sector to import it

In this fiscal year, New Delhi has already raised fertilizer subsidies twice pushing up the 835.48-billion-rupee budgeted support by 434.30 billion Rupees.

“This year is going to be one of the highest subsidy payout because prices in international markets have gone up due to various reasons including restriction by China on DAP exports,” said one of the officials.

DAP imports delayed

India imports an average 60% of the 10-12 million tonnes of its annual DAP consumption. “Of this 40% comes from China,” a second source said.

He said some DAP parcels from China have been delayed due to exports restriction. To avoid shortages, the government has also decided to further enhance compensation to the firms importing DAP after restriction by China.

“We have asked some of the NPK (nitrogen, phosphate and potassium) manufacturers to switch to production of DAP,” this source said, adding the Fertilizer Ministry has augmented supplies to the districts with low stocks on a priority basis.

Also read | Centre urged to ensure adequate fertilizer supply

“Earlier, we were using 15 trains for supplies of fertilizer in the country but since October we have doubled the number of trains for supplies,” the source said.

However, farmers in India have complained about difficulties in getting DPA. Demand for fertilizer rises during October and November, a peak season for plantation of winter sown crops such as wheat.

“We had difficulty in buying DAP this time and prices are also high,” said Ravindra Kajal, a wheat grower from northern State of Haryana.

The Finance Ministry and the Fertilizer Ministry did not respond.

For years, India has capped the price of urea at ₹5,360 ($71.36) per tonne excluding taxes, while in the global markets prices have surged to around $990/tonne, a third source said. India imports about 30% of about 35 million tonnes of average annual consumption of urea.

According to the government data, urea prices surged by an annual 144% in October to $690/tonne, while DAP prices rose by 84.3% on delivered basis to $682/tonne.

India does not control prices of DAP but raises the subsidy to keep an indirect check on retail prices. Retail prices of a tonne of DAP in India hover around ₹25,000 ($332.85), whereas global prices have surged to about $750, the third source said.

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