The crisis in Ukraine following invasion by Russia has sent shock waves through out the world economy. In India, even as the steep rise in energy import bill will affect almost all sectors of the economy, the impact on fertilizers will be more pronounced. At the outset, let us capture a few relevant facts. Despite prognostications by successive governments during the last four decades or so that India would become self-reliant in fertilizer availability and putting in place policies (in particular pricing and subsidy policies) aimed at achieving the goal, even today, the country remains preponderantly dependent on imports for meeting the requirements of its farmers. Three most popular fertilizers used by farmers are urea, di-ammonium phosphate (DAP) and muriate...
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Category: Fertilizers
Budget 2022-23: Avoid a debt trap
‘Demand recession’ is inevitable if Government does not reform taxation, subsidy administration, unshackle farmers and ruthlessly tackle corruption The Union Budget for 2022-23 provides for capital expenditure of Rs 750,000 crore which is a jump of over 35 percent from the budget estimate (BE) of Rs 554,000 crore for 2021-22 (revised estimate (RE)for the current year is Rs 604,000 crore which is more or less close to the BE when we exclude Rs 50,000 crore given to Air India Asset Holding Company Limited AIAHCL where the debt of now divested Air India resides). Considering that the BE for current year was 26 percent higher than the RE of Rs 439,000 crore during 2020-21, this sounds impressive. However, when seen in...
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Tackling fertilizer subsidy – political will missing
In the Union Budget for 2022-23 presented by the Finance Minister, Nirmala Sitharaman on February 1, 2022, Modi – government has allocated Rs 105,000 crore for fertilizer subsidy which is Rs 35,000 crore less than the actual expenditure of Rs 140,000 crore during the current year as per the revised estimate (RE). Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production and import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme. In...
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Fertiliser DBT stymied by lobbies for years
When a subsidised product is not available in the marketplace, the dubious characters will have nothing to prey upon It is budget time. After two years of splurge, Finance Minister Nirmala Sitharaman has alluded to a return to fiscal consolidation. A major area meriting attention is fertilizer subsidy which jumped from `80,000 crore during 2019-20 to `134,000 crore during 2020-21 and is likely to be `140,000 crore during 2021-22. Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price, unrelated to the cost of production and import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess...
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Fertilizer DBT – stymied by lobbies
It’s budget time. After two years of splurge, the finance minister, Nirmala Sitharaman has alluded to returning to fiscal consolidation. A major area meriting attention is fertilizer subsidy which jumped from Rs 80,000 crore during 2019-20 to Rs 134,000 crore during 2020-21 and is likely to be Rs 140,000 crore during 2021-22. Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production/import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme (NPS). In case...
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Fertiliser industry is not yielding results
The Govt should remove control on urea and stop giving subsidy through manufacturers; instead, the Government can give it directly to farmers Inaugurating the revival project —annual production capacity of 1.27-million-ton(MT) neem coated urea — of the Hindustan Urvarakand Rasayan, a public sector joint venture of Coal India Limited, NTPC, Indian Oil Corporation and FCIL — at Gorakhpur on December 7, Prime Minister, Narendra Modi made the following four observations: Despite steep increase in international price of fertilizers during the current year, the Government has ensured that the farmers don’t have to pay more; 100 percent neem coating has helped in reining in diversion of urea to non-agricultural/industrial uses; Gorakhpur a long with four other revival projects currently under implementation...
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Fertilizers – all is not well
Inaugurating the revival project – annual production capacity of 1.27 million ton (MT) neem coated urea – of the Hindustan Urvarak & Rasayan, a public sector joint venture of Coal India Ltd (CIL), NTPC, Indian Oil Corporation (IOC) and FCIL – at Gorakhpur (Uttar Pradesh) on December 7, 2021, Prime Minister, Narendra Modi made the following four observations:- (i) despite steep increase in international price of fertilizers during the current year, the Government has ensured that the farmers don’t have to pay more. (ii) 100 percent neem coating has helped in reining in diversion of urea to non-agricultural/industrial uses; (iii) Gorakhpur along with four other revival projects currently under implementation will add 6 million tons (MT) to existing annual urea...
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Policy flaws in fertiliser sector
The unprecedented increase in international prices of complex fertilizers primarily di-ammonium phosphate (DAP) as well as raw materials – phosphoric acid and ammonia used in their production – has sent shock waves through the industry. At the beginning of the year, when the prices were up 60 per cent to 70 per cent over last years’ level, the government was in deep slumber. Even as the cost of supplying a bag (50 kg) of DAP went up from Rs 1,700 last year to Rs 2,400, it kept the subsidy unchanged at the last years’ level of Rs 500. As a result, its maximum retail price (MRP) increased from Rs 1,200 to Rs 1,900 inviting farmers’ wrath. The Centre responded by...
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Urea subsidy regime – time to reform
Come October 1, 2021, the price of natural gas (NG) on supplies from fields given to Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) on nomination basis as well as those given under given under the New Exploration and Licensing Policy or NELP will increase from the current US$ 1.79 per million British thermal unit (mBtu) to US$ 3.15 per mBtu – up by US$ 1.4 per mBtu. From November 1, 2014, this price – known as administered price (APM) – is a weighted average of the price prevailing at four global locations viz. UK, US, Russia and Canada. The price is revised every six months. Going by the emerging trend, the APM gas price is likely to...
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Fertiliser subsidy policy is skewing crop yields, soil health
A major factor fuelling resentment among farmers is the spiralling prices of fertilisers that are critical in the production of agricultural products. There are two types of fertilisers: Urea— the predominant source of nitrogen or ‘N’ nutrient supply— and phosphate and potash fertilisers— the source of ‘P’ nutrient and ‘K’ nutrient; there are 22 grades of such fertilisers and the most widely used are Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP). The Maximum Retail Price (MRP) of urea is controlled by the Centre at a low level and is unrelated to the cost of production and distribution which is higher (the excess amount is reimbursed to the manufacturers via the subsidy on a ‘unit-specific’ basis under the New Pricing...
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