The Government proposes to slash the subsidy on non-urea fertilisers such as di-ammonium phosphate (DAP) by 14 per cent and muriate of potash (MoP) by about 19 per cent for 2013-14, following the decline in global prices of these nutrients.
The Fertiliser Ministry has proposed a subsidy cut of Rs 2,000 a tonne for DAP and Rs 2,700 for MoP for the 2013-14, sources said.
The subsidy on DAP is likely to be pegged at Rs 12,350/tonne for 2013-14 against last year’s Rs 14,350. Similarly, the subsidy for MoP may be fixed at Rs 11,740 (Rs 14,440).
P & K fertilisers
The proposed cut may not hit the maximum retail prices of these complex nutrients as global prices have softened by 15-20 per cent in recent months. As the country is nearly fully dependent on the imports of phosphatic (P) and potassic (K) fertilisers either in the form of finished fertilisers or their raw materials and the subsidy being fixed, its international prices affect the prices of these nutrients.
On Friday, Minister of State for Fertilisers Srikant Jena hinted at a reduction in subsidy rates for P&K fertilisers.
“Since the present international prices of P&K fertilisers are comparatively less as compared to those in last year, the subsidy rates for the year 2013-14 will be fixed accordingly,” Jena told the Rajya Sabha in a written reply.
Subsidy fixing
The subsidy rates are fixed on an annual basis considering factors such as international and domestic prices of fertilisers, inventory and the exchange rates.
The Cabinet is expected to approve the proposed rates ahead of the new financial year. Such a move would help the manufacturers to print the maximum retail price on bags and start bagging the nutrients for despatch ahead of the forthcoming kharif season.
The Government, which implemented the Nutrient Based Subsidy (NBS) policy for P&K fertilisers since April 2010, has been announcing the subsidy rates before the start ofthe financial year. The subsidy is to make P&K fertilisers available at a lower price than its delivered costs and is reimbursed to the fertiliser companies.
budgetary provision
For 2013-14, the Government has made a budgetary provision of Rs 29,427 crore for de-controlled fertilisers such as DAP and NPK stood, against the revised estimate of Rs 30,576 crore for 2012-13.
While urea is heavily subsidised by the Government and is currently priced at Rs 5,360, the DAP and MoP prices ruled at Rs 24,000 and Rs 17,000 respectively in the current year.
The huge difference in prices led to imbalance in fertigation, resulting in a build-up of non-urea fertiliser stocks, estimated at over seven million tonnes.
Recently, some companies such as Indian Potash Ltd have contracted to import about one million tonnes of MoP for 2013-14.