Our expectations from the forthcoming Union Budget relate mainly to correcting the huge imbalance now in fertiliser use, with farmers applying more of the highly subsidised urea and less phosphatic and potassic fertilisers.
Bringing urea under the nutrient-based subsidy (NBS) regime will not only encourage balanced nutrient application but also improve the availability, correct the artificial price incentive for urea and also contain the Centre’s subsidy outgo. Thus it will help all stakeholders. Reforms will pave the way for direct disbursals of subsidy to farmers and also enable the industry to become more efficient.
The Government should rationalise the inverted duty structure, which is in favour of finished products.
For example, imported DAP (di-ammonium phosphate) attracts five per cent Customs duty, whereas sulphuric acid attracts a higher duty of 7.5 per cent, while it is 5 per cent on phosphoric acid. Rock phosphate imports attract 2.5 per cent Customs duty.
These duties should be brought down to zero or a nominal rate of 1 per cent to encourage domestic manufacturers.
Hiking urea prices by 30-40 per cent will not impact demand.
At present, only 20-25 per cent of the product value of urea is paid by farmers, while the rest is subsidised.
The Government should increase the farm-gate urea price in two to four tranches.
As far as consumption goes, despite talk of a poor monsoon because of El Nino, likely to appear by August-September, we expect sales of non-urea fertilisers to be better this year. In the past two years, sales of phosphatic and potassic fertilisers (including NPKS complexes) were down. But farmers are beginning to see productivity losses as a result and are unlikely to cut back on application rates this time.
I expect a 10 per cent increase in sales of non-urea fertilisers and 3-4 per cent in the case of urea.
(Kapil Mehan is Managing Director, Coromandel International Ltd.)
(As told to Vishwanath Kulkarni)