Category: Fertilizers

P&K fertilizers – subsidy conundrum

A major factor fueling resentment among farmers is the spiraling prices of fertilizers which are critical inputs used in the production of agricultural products. The maximum retail price (MRP) of urea – the predominant source of nitrogen or ‘N’ nutrient supply – is controlled by the Centre at a low level un-related 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 scheme or NPS in short). This price has remained unchanged (today’s price is the same as in 2002) even as all cost escalations are absorbed by increasing the subsidy. However, the worry is with regard to another category of...
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Making urea that is not needed: New Talcher urea project will further worsen the unsustainable fertiliser subsidy burden

The new urea project at Talcher will worsen the already unsustainable fertiliser subsidy burden as retention price at this project may surpass the current high of $350/tonne The RP in turn, is calculated taking into account efficiency norms such as capacity utilisation, energy consumption, capital related charges (CRC), other fixed cost, delivered cost of gas and other inputs, etc. The Cabinet Committee on Economic Affairs (CCEA) has recently approved subsidy for urea to be produced by Talcher Fertilizers (TFL) —a joint venture of four PSUs: Coal India Limited (CIl), GAIL, Rashtriya Chemicals and Fertilizers (RCF), and Fertilizer Corporation of India (FCI). TFL is setting up the capacity of 1.27 million tonne per annum at Talcher, Odisha, at an estimated investment of Rs 13,277...
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Making urea, that is not needed

The Cabinet Committee on Economic Affairs (CCEA) has recently approved subsidy for urea to be produced by Talcher Fertilizers (TFL) – a joint venture of 4 public sector undertakings (PSUs) viz. Coal India Limited (CIL), GAIL (India), Rashtriya Chemicals and Fertilizers (RCF) and Fertilizer Corporation of India (FCI). The TFL is setting up the urea plant with installed capacity of 1.27 million ton per annum at Talcher (Odisha) at an estimated investment of Rs 13,277 crore and is expected to be commissioned by September 2023. The project is based on use of coal gasification technology. According to the union commerce minister, Piyush Goal, the CCEA has given its approval for “a specific subsidy to promote this innovative technology for the...
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Union Budget FY22 misses the chance to reform fertiliser subsidy

The fertiliser subsidy allocation for FY22 signals there will be no reform this fiscal; deficit targets show this is unlikely in the next five years too The subsidy can be restricted only to farmers having less than two hectares. Under the “Stimulus – III” unveiled on November 12, 2020, the Union finance minister, Nirmala Sitharaman, made an unprecedented announcement to release an additional Rs 65,000 crore towards fertilisers subsidy over and above Rs 71,000 crore allocated in the Budget for FY21. She has followed it up by providing a total of about Rs 134,000 crore in the revised estimate (RE). This should be enough to pay for all subsidy dues, including carry forward from FY20. For FY22, she has allocated...
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Fertiliser DBT an illusion

Despite tall claims made by the UPA and the NDA dispensations since 2012, a gradual transition to direct cash or benefit transfer of subsidy to the farmers has not been done The additional provision of Rs 65,000 crore towards fertiliser subsidy (over and above the Rs 71,000 crore allocated in the Budget for 2020-21), that was announced by the Finance Minister under “Stimulus- III” on November 12, will help in clearing all pending dues to the industry. This has led the latter to believe that this is a precursor to a gradual transition to direct cash or benefit transfer (DBT) of subsidy to the farmers. This is illusory, as despite tall claims made by the UPA and the NDA dispensations...
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Fertilizer DBT – miles away

Under the “Stimulus – III” unveiled on November 12, 2020, the union finance minister, Nirmala Sitharaman made an unprecedented announcement of releasing an additional Rs 65,000 crore towards fertilizers subsidy over and above Rs 71,000 crore allocated in the budget for 2020-21. For an industry used to not getting thousands of crores in subsidy dues year-after-year for several decades in the past, this has come as a big bonanza in as much as the amount will help in clearing almost all of their pending dues. But, the Fertilizer Association of India (FAI) – an umbrella organization of fertilizer manufacturers – is reading a lot more into this decision. It is seeing this as a precursor to structural reforms in this...
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Urea imbroglio: Govt must deal with policy flaw

For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. The scale of diversion could be as high as 30%. Taking annual subsidy on urea to be about Rs 50,000–55,000 crore, this would mean that Rs 15,000–16,500 crore of taxpayers’ money is being guzzled by dubious operators. During the last five years or so, the Narendra Modi government has taken several steps to address it. Let us see how these have fared and assess what needs to be done to make a dent. At the outset, let us capture a few basics about the pricing and subsidy policy. To make urea...
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Urea imbroglio – deal with policy flaw

For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. According to an estimate, the scale of diversion and black marketing could be as high as 30%. Taking annual subsidy on urea to be about Rs 45,000 – 50,000 crore, this would mean that Rs 13,500 – 15,000 crore of tax payers’ money is being guzzled by dubious operators in the urea supply chain. For long, this problem was swept under the carpet until such time,  prime minister Narendra Modi brought it to the centre-stage within an year of his assuming office in May 2014. During the last 5 years or so, his...
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Fertile for Reform: Rational use of urea — Chasing a mirage?

The govt must free up urea pricing and opt for direct transfer of fertiliser subsidies to farmers; no other steps to curb urea misuse will work Second, the need for a comprehensive action plan to increase the MRP of urea was recognized by the Dr GVK Rao committee on Consumer Price of Fertilizers (1987). Over the last five years, the Narendra Modi-led government has made several efforts to tackle diversion, hoarding, black marketing and excessive use of urea—a widely-used fertiliser that accounts for nearly half of India’s total fertiliser consumption. These include (i) mandatorily requiring all manufacturers/ importers to do neem-coating of urea supplies (2015); (ii) making disbursal of subsidy to manufacturers conditional upon actual sales to farmers and sales getting...
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Curbing urea use by half

On December 5, 2017, in his Mann Ki Baat radio address, the Prime Minister said, “Can our farmers take a pledge to reduce urea use by half by 2022? If, they promise to use less urea in agriculture, the fertility of the land will increase and the lives of farmers will start improving.” For this, Modi had in mind a time frame of 5 years Currently, there is excessive use of urea — a dominant source of ‘N’ vis-à-vis complex fertilizers such as diammonium phosphate (DAP) the main source of ‘P’ and muriate of potash (MOP), the main source of ‘K’. This has led to an increasing imbalance in the NPK use ratio. On an all-India basis, currently this ratio...
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