Lower global price helped subsidy payout for nutrient-based fertilizer dip by around 38 per cent during April-September period, government data showed. Payout for urea dropped too but only marginally by 6 per cent.
The data have come in the public domain at a time when there was violence in some States on account of shortage of fertilizers. Normally, farmers buy fertilizers in September and October for rabi crops. While the government fixes maximum retail price (MRP) for urea, companies do the same for Phosphatic and Potassic (P&K) fertilizers. Accordingly, the government bears the difference between MRP and cost price for urea and companies get subsidy for P&K under nutrient-based subsidy (NBS) scheme.
However, to make sure farmers do not have to pay more than ₹1,350/bag (of 50 kg) for Di-ammonium Phosphate (DAP), the government has been taking several steps, including enhancing the subsidy. The Fertilizer Ministry announced on October 23 that the subsidy for rabi 2024 has been raised. A special package of ₹3,500 per tonne, costing ₹2,625 crore, has been introduced to stabilise the price of DAP, ensuring companies can maintain their procurement capacity despite price fluctuations.
It also said that the overall increase in global prices has been taken care of by another Cabinet decision by which subsidy has been linked to the market prices. “If the procurement price of P&K fertilizer, including DAP, increases in the global market, the procurement capacities of the companies are not affected. Therefore, farmers are the ultimate beneficiaries,” the ministry said.
The Budget, presented in July, made a provision of ₹1.64 lakh crore for fertilizer (urea plus and nutrient based) for FY25 against ₹1.89 lakh crore under revised estimate of ₹1.89 lakh crore for FY24. BE for FY25 was even lower than the FY24’s BE of ₹1.75 lakh crore.
Imported DAP price (CFR) in September rose 7 per cent to average $ 632/tonne from year-ago whereas urea dipped 14 per cent to $ 345/tonne and that of Muriate of Potash (MoP) fell 24 per cent to $ 283/tonne.
World Bank index
A World Bank blog highlighted that the World Bank’s fertilizer price index remained relatively stable during the second quarter (April-June of 2024, following a 20 per cent drop in the first quarter (January-March).
“Upside risks to the forecast include potential increases in input costs, especially natural gas. However, a resumption of China’s exports and lower-than-expected crop prices could contribute to further declines in fertilizer prices,” the blog said.
Domestic sales of DAP fell 51 per cent to 7.76 lakh tonnes (lt) in September from 15.7 lt year-ago and that of MoP dipped 4.7 per cent to 2.25 lt from 2.36 lt. But sales of urea were up 3.1 per cent at 30.89 lt in September 2024 from 29.97 lt year-ago. The government is yet to release sales data of October, when most of the reports of fertilizer scarcity appeared.