Primus Partners Pvt Ltd, a management consulting services firm, on Thursday came out with a white paper on the chemicals industry with a specific focus on the fertilizer subsidy, stressing the need to facilitate transition to alternative practices.
“... economic studies must be conducted in each crop cluster to assess the impact on farm inputs, investments, cash flow, farmer efforts and output quality. Identifying the necessary support and cost-effective initiatives for farmers to make the switch is essential,” the company said.
Additionally, the development of value chains for the proposed solutions, accompanied by special schemes, will enhance the economic viability of key participants, the white paper said.
Subsidy unpredictable
The white paper, in particular, sheds light on the significance of the fertilizer subsidy, its inherent volatility and the imperative need for effective policies to address the challenges it poses.
Fertilizer subsidy constitutes a substantial portion with an annual allocation of approximately ₹1.75 lakh crore, accounting for approximately 20 per cent of all schemes in the 2023-24 budget. This allocation is divided into two major components: ₹1.31 lakh crore for urea subsidy and ₹44,000 crore for nutrient-based subsidy.
However, Primus said, the fertilizer subsidy is often seen to be unpredictable, with the revised estimate for 2022-23 surpassing the budgeted amount by more than two-fold. “This volatility primarily stems from fluctuations in international gas and urea prices. The fertilizer subsidy has an important role in overall food production of India and management of farm input for the farmers,” it said.
Need to resolve deadlock
Many issues with the subsidy have since been identified. There has been a deadlock between conflicting and noble goals, which needs to be resolved, the white paper said
The company has highlighted the reasons for the deadlock that is preventing improvement on fertilizer subsidy policy and mechanism. “We believe that viable alternatives need to be created for farmers to move away from harmful overuse of urea. By improving subsidy policies and mechanisms and embracing technological advancements and tailored farming techniques, we can unlock new avenues of growth and sustainability in the fertilizer industry,” said Anurag Singh, Managing Director, Primus Partners.
Reducing the use of urea by fostering viable alternatives is of paramount importance. “Technological advancements in agriculture, such as nano urea, precision agriculture, drone usage, GIS applications and improved farming techniques, exhibit promising potential in achieving this objective,” the white paper said.
Developing a tailored bundle of technologies and practices specific to crop clusters, such as the potato cluster in the Firozabad area, will help prioritise areas with the highest potential for reducing urea usage, it said.