Agri Business

Farmers may have to pay more for DAP, potash, complex fertilisers

Prabhudatta Mishra | | Updated on: Apr 04, 2022

Some manufacturers have hiked prices, others await clarity on the situation

The fertiliser industry is not hopeful of an increase in subsidies from last year’s level for non-urea crop nutrients despite global prices shooting up sharply.

Several companies have increased the maximum retail price (MRP) of fertilisers, while some others are waiting for clarity. The recent farmers’ movement and the farm leaders’ unsuccessful dabbling in electoral politics is also seen as a factor for maintaining the subsidy at last year level.

IFFCO increases rates

Fertiliser cooperative IFFCO last month raised the MRP of DAP to  ₹1,350 (per 50 kg bag) from  ₹1,200, that of NPKS to  ₹1,400 from  ₹1,290. The DAP subsidy was increased to  ₹1,200/bag last year from  ₹500/bag after global prices increased. As the current international prices have further increased, the government subsidy might have to be around  ₹1,450-1,500 if the government wants the purchase rate for farmers to remain at  ₹1,200/bag.

Some companies are maintaining the MRP of muriate of potash (MoP) at  ₹1,700-1,750 which was effected in last rabi season (against annual average of  ₹1,130/bag in 2021-22), while the new MRP could be  ₹2,400-2,450 (without subsidy) at current import price.

Urea MRP is fixed and the entire subsidy is paid to fertiliser companies based on actual sales, whereas in the case of MoP, DAP and complex, the subsidy is fixed on the basis of nutrients (N, P, K and S) and is announced at the beginning of the year to help companies plan import, manufacturing and distribution in advance so that these are available at the time of sowing that commences from June with the onset of monsoon.

Subsidy allocation

The government has allocated  ₹42,000 crore for phosphorous and potash subsidy for 2022-23 whereas it was enhanced to  ₹64,150 crore in the revised estimate (RE) from  ₹20,720 crore during 2021-22, though the hike was confined only to additional burden on phosphorous nutrient.

“Minimum two months are required for planning as revised MRP is to be printed in the bag (it is illegal to put any sticker). Secondly, the company will have to assess the demand based on MRP as subsidy has a direct bearing on consumption and can accordingly sign contracts for import,” said an industry official. There could be some indications from the government based on which the prices have been revised, sources said. Besides, the average MRP of DAP was about  ₹1,350 in 2018-19 and there was no farmer protest, the sources said.

Govt in a spot of bother

However, some industry experts said last year in April, IFFCO had hiked DAP price by 58.33 per cent to  ₹1,900 per bag, prompting the government a month later to announce a  ₹9,125 crore additional subsidy for DAP to maintain its MRP at  ₹1,200/bag. This year, however, the situation is difficult as the government is not ready to subsidise petrol, diesel which impact even more people, compared to users of these fertilisers.

“Some leaders who tried to defeat BJP in recent assembly polls were rejected by the people because farmers know that they are not getting what consumers are paying for crops. Farmers’ agitation killed the hope for market linkages. A majority of farmers are more interested in progressive measures to increase income rather than surviving on subsidies and doles,” said food policy expert Vijay Sardana. The government must evaluate marketing and also the entire financial condition, Sardana said, adding that sometimes tough measures are needed to ensure consumer spending reaches farmers.

When the import of potash was done at $445, the MRP of MoP was ₹ 1,700-1,750 per bag and the global prices have since gone up to $590/tonne. Similarly, DAP prices have gone up to $1,200 from $920 during the past three months. On the other hand, global urea price has surged to $1,050 (CIF) from $1,000 since India last contracted in December 2021.

Around 17 per cent of India’s import of MoP and roughly 60 per cent of NPK fertilisers are from Russia. Global prices of fertilisers increased last year after China banned export and it further aggravated this year following Russia-Ukraine war.

Published on April 04, 2022
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