Agri Business

Centre plans mechanism to compensate fertiliser firms for higher production costs

Suresh P Iyengar Mumbai | Updated on September 23, 2021

No hike in subsidies

The Union Fertiliser Ministry will work out a mechanism to compensate the industry for the higher cost of production it will incur to produce fertilisers without increasing the subsidy component.

Union Minister for Chemicals and Fertilisers Mansukh Mandaviya said this at a meeting called to discuss fertilisers supply for the rabi season in New Delhi, sources said.

Subsidies will not be raised but a mechanism will be worked out to cover up the gap between higher production cost and retaining selling price of DAP at the current level, he said.

However, the government is not considering any support for production of complex NPK (nitrogen, phosphorus, potassium) fertiliser which is expected to impact balance nutrition for the crop, he said.

The Minister also asked fertiliser companies to ramp up production to ensure ample supply during the ensuing rabi season.

The Government asked the industry, including public sector companies, to normalise supplies of diammonium phospate (DAP) through higher production and imports ahead of the rabi sowing season, which will begin next month.

Fingers crossed

With no clear plan on how the compensation mechanism will work, fertiliser companies are keeping their fingers crossed. Their concerns stem from logistics and transportation costs zooming due to non-availability of vessels and containers to bring in the consignments. Shipping costs have almost doubled, thus pushing up production costs.

Fertiliser demand in the US and Brazil is strong with sharp increase in area under corn and soyabean amid record prices for both the crops.

As a result, demand for fertilisers has remained robust in these countries limiting global supplies and pushing fertiliser prices to decade-high levels. The Indian fertiliser industry relies on imports to meet demand as domestic supplies are limited.

After facing challenges in sourcing fertiliser last season due to Covid restrictions on logistics, farmers are expecting a bumper crop of wheat, mustard, potato, onion, sugarcane, maize which require more fertiliser in northern and central States.

Published on September 22, 2021

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