While companies have the flexibility to set their MRP, these prices remain under close government scrutiny, ensuring affordability without undermining competition Just around the time when the Rabi Crops season (October 2024 – March 2025) has commenced, there was a shortage of di-ammonium phosphate (DAP) in many parts of the country. DAP is a widely used complex fertiliser that supplies 46 per cent Phosphate or ‘P’ nutrients besides 18 per cent Nitrogen or ‘N’ (a ton of DAP contains 180 kg ‘N’ and 460 kg ‘P’). The annual consumption of DAP is around 10 to 11 million tons. Against this, domestic production is less than half at around 4.5 – 4.8 million tonnes. The deficit is made up of imports...
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Category: Fertilizers
Need for rationalising taxes on fertilisers
The GST Council, responsible for tax rate decisions has yet to resolve the tax discrepancies despite multiple discussions and recommendations For over five years now, the fertilizer industry has been facing an ‘inverted duty structure’. Inverted duty structure refers to a situation in which raw materials (RMs) are taxed at a higher rate than finished products in whose manufacture these are used. But, there was little that the Budget presented by the Union Finance Minister (UFM) Nirmala Sitharaman on July 23, 2024, could do to address it. Fertilizers and RMs used in their making are mostly taxed under the GST (Goods and Services Tax) regime. The GST Council – headed by the UFM that includes finance ministers from all States...
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Plug leakages in fertiliser subsidy
The real reason behind the leakage is control of the MRP at an artificially low level. Dubious players have a huge incentive to divert and rake in the moolah As part of the 100-day agenda of Modi 3.0, the Government intends to administer fertiliser subsidies more effectively and cut down on leakages and diversions to build on the success of neem-coated urea. It intends to conduct a pilot in a few districts on a modified version of the direct benefit transfer (DBT) that seeks to establish a linkage between the land holding of a farmer and nutrient consumption. A proposal in this regard mooted in 2020 is being resurrected. To make urea – a widely used fertiliser that supplies primary...
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Sustainable agriculture with nano-fertilisers
As India gears up to ramp up production of nano-fertilisers, questions arise regarding the technical feasibility and logistical implications of transition Recently, the Union Minister for Chemicals and Fertilisers Mansukh Mandaviya stated “Consumption of urea this fiscal is likely to be 8 percent less than in FY 2022-23 due to the use of its liquid nano variant. Because of this and higher domestic production, import of urea, the soil nutrient that accounts for 70 per cent of the fertiliser subsidy bill, declined more than a fifth on year in 2023. Further spread of nano urea consumption and the start of a new large urea plant (Talcher in Odisha) by September 2023 would lead to elimination of imports in two-three years”....
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The conundrum of fertiliser pricing
The fact is that non-urea fertilisers, in practice, have consistently remained under regulatory control In an office memorandum dated January 17, 2024, the Department of Fertilisers (DoF) has issued detailed guidelines for the evaluation of “reasonableness” of the MRPs (maximum retail price) for all non-urea fertilizers covered under the Nutrient Based Scheme (NBS). To be effective from April 1, 2023, the guidelines prescribe maximum profit margins that will be allowed for fertilizer companies – 8 per cent for importers, 10 per cent for manufacturers and 12 per cent for integrated manufacturers (those producing finished fertilizers as well as intermediates such as phosphoric acid and ammonia). The admissible profit margins will be calculated as a percentage of their “total cost of...
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Fix the flaws in fertiliser taxation
When the government spends heavily from its budget to make fertilisers available to farmers at a fraction of their cost, it seems senseless to tax them or the RMs used for making them. The Standing Committee on Chemicals and Fertilisers has recommended that the Centre propose to the GST Council to reduce tax rates on fertilisers from the current 5%. It has also sought a reduction in GST on raw materials (RMs) used in the making of fertilizers. Currently, RMs such as sulfuric acid and ammonia are levied 18% GST, while phosphoric acid attracts 12%. The present structure of taxing fertilisers and RMs used for making them has three major flaws. 1. To make fertilisers affordable to farmers, the government...
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Rationalise taxes on fertilisers
The cost of making fertilisers available to farmers by itself is substantially higher than the price the Govt wants them to pay, ideally, it should not levy any tax In its report laid in Parliament on August 9, 2023, the Standing Committee on Chemicals and Fertilizers has recommended that the Union Government should propose to the GST Council to reduce tax rates on fertilizers from the current 5 per cent. Initially, fertilizers were placed under the 12 per cent slab. However, following representation made by various states, the tax rate was reduced to 5 per cent. Now, the Committee wants this to be reduced further. It has also asked the Government to “consider favourably the proposal to lower GST on...
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Self-reliance in fertilisers
Potash (K), and phosphate (P) are among the three major plant nutrients (the third being nitrogen or ‘N’) needed for increasing the production of foodgrains and other agricultural products. Their requirements are met mostly from imports. A farmer sprinkles fertiliser on paddy crop in Koppal district. The enactment of two laws, viz. the Mines and Minerals (Development and Regulation) Amendment Act, 2023, and the Offshore Areas Mineral (Development and Regulation) Amendment Act, 2023, in the monsoon session of Parliament bodes well for the Indian fertiliser sector. While the first law paves the way for the auction of critical minerals such as potash and phosphate blocks for exploration and processing in India, the second law provides a fixed 50-year production lease for offshore minerals....
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‘Indigenous’ fertilisers must be explored
The government must pursue indigenous sources of fertiliser raw materials to minimise India’s vulnerabilities on imports The enactment of two laws viz. The Mines and Minerals (Development and Regulation) Amendment Act, 2023 and the Offshore Areas Mineral (Development and Regulation) Amendment Act, 2023 in the just concluded monsoon session of the parliament bodes well for the Indian fertilizer sector. While the first law paves the way for the auction of critical mineral potash (besides lithium and graphite) blocks for exploration and processing in India, the second provides a fixed 50-year production lease for offshore minerals. Potash or ‘K’ is amongst the three major plant nutrients (the other two being Nitrogen or ‘N’ and Phosphate or ‘P’) needed for increasing production...
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The success of PM PRANAM depends on reducing urea usage by farmers
The government has rightly emphasised the need for shifting away from chemical fertilisers, reducing imbalance in nutrient use and rejuvenating the soil. But this won’t be possible till the existing policy framework is changed The announcements on urea perpetuate their use by emphatically stating that the extant pricing and subsidy policies will continue. The Union government made three major policy announcements on June 28, 2023 — continuation of the urea subsidy scheme up to 2025-26 with an outlay of Rs 3.68 lakh crore, continued availability of urea to the farmers at the maximum retail price of Rs 242 per 45 kg bag and a new scheme PM-PRANAM (PM programme for restoration, awareness, nourishment and amelioration of mother earth). The first...
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