The Government should hike retail prices of urea by Rs 750 a tonne, get the industry to reduce the same on di-ammonium phosphate (DAP) and muriate of potash (MOP) by Rs 1,000 and Rs 1,500 a tonne respectively, and stop giving any subsidy on imported fertilisers for one year.
These measures together will help it realise over Rs Rs 22,000 crore worth of subsidy savings, without harming the farmer while also providing some respite to a cash-strapped industry, according to the Managing Director of the country’s largest nutrients supplier, Indian Farmers Fertiliser Cooperative (Iffco), U.S. Awasthi.
“As on January 1, the country has roughly 6 million tonnes (mt) stocks of DAP and various NPK complexes. We can easily afford not to import any more of these nutrients for one year. That can be done by completely dispensing with subsidy on their imports,” he told
During the current fiscal till January 15, India has imported 5.77 mt of DAP and 0.4 mt of complexes.
Taking an average subsidy concession of Rs 14,100 a tonne, the Government can straightaway save Rs 8,700 crore, not to speak of $3.4 billion of reduced foreign exchange outgo at a landed import price of $550 a tonne.
Imported urea subsidy
Similarly with urea, the Government can stop giving any subsidy on imports amounting to more than 15 per cent of domestic production. So, if India is producing 20 mt, it means limiting imports to 3 mt, whereas it has already touched 7.7 mt so in 2012-13.
The subsidy (base concession) given on imported urea is about Rs 18,000 a tonne. On the excess imports of five mt, the savings from not granting any subsidy will work out to another Rs 9,000 crore.
“We must take a policy decision to stop giving subsidy on imported DAP/complexes for a year (given ample stocks) and urea beyond 3 mt. It will lead to subsidy savings of some Rs 18,000 crore,” Awasthi added.
Over and above this, he suggested raising the maximum retail price (MRP) of urea by Rs 750, from the existing Rs 5,265 a tonne.
savings
The Government can also reduce the concession on DAP and MOP by Rs 1,000 a tonne each, which will, in turn, translate into lower subsidy rates on N, P and K. The savings from this would come to nearly Rs 4,700 crore.
The annual subsidy savings from all these together would work out to over Rs 22,000 crore.
As regards farmers, Awasthi said that given the possibility of contracting imported fertilisers (mainly potash) and raw materials at lower prices this year, the industry would be in a position to reduce the MRP of DAP by Rs 1,000 and of MOP by Rs 1,500 a tonne.
This will adequately compensate for the increase in the MRP of urea by Rs 750 a tonne. In any case, farmers in many parts of the country are paying Rs 7,000 or more for every tonne of this nutrient, as against the official MRP of Rs 5,365.
“When you price something artificially so long, this is bound to happen down the distribution chain, on which we have no much control,” he noted.
The Rs 22,000 crore-plus savings from the above proposals, Awasthi said, will also help the industry.
“The budgeted subsidy of Rs 65,000 crore for 2012-13 has already been overshot by Rs 22,000 crore till December. For the remaining three months, we will require another Rs 11,000 crore.
The Government will have to do something fast because we just cannot manage with such large outstanding dues, which has to be covered by borrowing from banks. Ultimately, it means paying subsidy to the banks as well”, he quipped.