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With many calling this year’s Budget as the ‘Make in India Budget’, it would be the right time to see if it’s really viable to ‘Make Fertiliser in India’. Fertilisers played a major role in India’s growth story turning it from a net importer of foodgrains to an exporter of many crops. But even after a tremendous contribution towards the growth of the nation the sector today is struggling for survival. In April 2010, the government tried infusing new life in this sector by introducing nutrient-based subsidy (NBS) in P&K fertilisers but unfortunately left urea, the most widely used fertiliser in India out of the NBS. This scheme made the P&K fertilisers commercially viable but increased the difference in the price of the two grades of fertilisers. This price difference has not only lead to a surge in the demand of cheaper urea (which is even cheaper than salt!) but has also tilted the application in its favour which has lead to imbalance fertilisation, diversion to industrial use and even smuggling.
The only solution to this is the gradual and incremental escalation in the price of urea. Ideally, it should be brought at parity with the price of P&K fertilisers but there will be political and economic challenges. So, initially, it can be increased by 10 per cent followed by an incremental increase each year with an aim to freeing the prices completely. Before freeing the price of urea, the government and producers should work towards a single price mechanism for production cost of urea. To aid this, the government can provide gas to these units at pooled prices and remove the restriction on the import of urea.
Lastly, the fertiliser subsidy should be directly given to farmers. This would help save a substantial chunk of subsidy by better targeting of beneficiary and will save producers from the delay in subsidy payments to them. This would require a synergy between the Jan Dhan Yojana, Aadhaar and the Kisan Credit Card and RuPay Card. It is very doable and the producers will be more than happy in making this a reality.
Awasthi is CEO & Managing Director, IFFCO
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