Govt set to hike nutrient-based subsidy rates on fertilisers

Harish Damodaran New Delhi | Updated on March 12, 2018


Fer chart

Fallout of continuous hardening of global nutrient prices

The Centre is set to announce a further hike in the benchmark import prices of di-ammonium phosphate (DAP) and muriate of potash (MOP) used to determine the nutrient-based subsidy (NBS) rates on various fertilisers.

An inter-Ministerial panel under the Secretary, Department of Fertilisers, is learnt to have approved higher import parity prices of $612 a tonne for DAP and $420 a tonne for MOP, as against the existing levels of $580 and $390.

These upward revisions would translate into increased NBS rates for phosphorus (P) and potash (K). Currently, the NBS rate on P, linked to a $580-a-tonne reference price for imported DAP, is Rs 29.407 a kg. On the proposed $612-benchmark price, it will go up to around Rs 31 a kg.

Likewise, the NBS rate on K will rise from Rs 24.628 to Rs 26.5 a kg with the assumed landed price being raised to $420 a tonne. “The new NBS rates, along with the corresponding higher subsidy on individual fertilisers, will be notified once it receives the Group of Ministers' nod. And that is expected soon,” sources told Business Line.

The NBS regime now covers 22 non-urea fertilisers, with the subsidy payable on each linked to their nutrient content. Thus, DAP, containing 18 per cent nitrogen (where the NBS rate is Rs 27.481 a kg) and 46 per cent P, attracts a subsidy of Rs 18,474 a tonne. Inclusive of an average retail price of Rs 10,750, the realisation for the manufacturer/importer comes to Rs 29,224 a tonne.

If the NBS rate on P is increased to Rs 31, the resulting higher subsidy of Rs 19,220 or so would take the gross realisation to Rs 29,970 a tonne. “That still leaves a gap of Rs 600-700 a tonne, which would have to be recovered from farmers,” the sources noted.

Similarly, on MOP (with 60 per cent K) or the popular 10:26:26 NPK complex fertiliser marketed by the likes of Coromandel International and Indian Farmers' Fertiliser Cooperative (Iffco), the subsidy would rise from Rs 14,777 to roughly Rs 15,913 and from Rs 16,797 to Rs 17,712 a tonne, respectively.

The Centre had, only on March 9, notified the per-kg NBS rates for 2011-12 at Rs 27.481 on N, Rs 29.407 on P, Rs 24.628 on K and Rs 1.692 on S, benchmarked to the corresponding landed prices of $350, $580, $390 and $180 a tonne for urea, DAP, MOP and sulphur.

These rates were, in turn, higher than their 2010-11 levels of Rs 23.227, Rs 26.276, Rs 24.487 and Rs 1.784 derived from the reference prices of $310 (urea), $500 (DAP), $370 (MOP) and $190 (sulphur).

The proposed further increase in NBS rates comes amidst a sustained hardening of global nutrient prices. For the current fiscal, Indian firms, including Zuari Industries, Iffco and Coromandel, have so far contracted nearly 2.5 million tonnes of imports at $612 a tonne, cost and freight.

While MOP deals are yet to be struck, global suppliers such as the Belarusian Potash Company and Canpotex are apparently quoting $520 a tonne, which, importers here feel is far too high.

Published on April 08, 2011

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