After a month’s delay, the Government on Wednesday announced a cut in subsidy on complex non-urea fertilisers for the current fiscal following the decline in global prices of potassic and phosphatic nutrients.
Under the nutrient-based subsidy (NBS) scheme, the Union Cabinet approved the new rates for nitrogen (N) at Rs 20.875 a kg against last year’s Rs 24.
Similarly, for potash (K) the subsidy rate has been fixed lower at Rs 18.33 (Rs 24), phosphate (P) at Rs 18.679 (21.80) and sulphur unchanged at Rs 1.677. The subsidy rates are applicable from April 1, an official statement said.
Based on these rates, the subsidy for di-ammonium phosphate (DAP) is fixed at Rs 12,350 a tonne, a 14 per cent decline over last year’s Rs 14,350 .
Similarly, the subsidy for muriate of potash (MoP) is pegged at Rs 11,300 , a 22 per cent decline over last year’s Rs 14,440 . The subsidy for other P&K fertilisers covered under the NBS policy shall also be according to the nutrient content in that grade.
Announcing the Cabinet’s decision, Finance Minister P. Chidambaram said that the total subsidy outgo for P&K fertilisers for 2013-14 would be lower by 15 per cent because of the decline in global prices. The actual subsidy outgo would depend on the consumption of these complexes.
MRP cut
Despite the subsidy cut, the Government expects the maximum retail prices of DAP and MoP to come down by Rs 1,500 and Rs 1,000 a tonne, respectively. DAP was sold at Rs 24,000 a tonne last rabi, while MoP was priced at Rs 17,000 a tonne. Fertiliser makers are expected to cut the maximum retail price (MRP) global prices have dropped more than the cuts in subsidy announced by the Government.
As a result, they are expected to pass on some of the benefits to farmers. Besides, the pressure to offload the existing stocks may prompt the fertilisers companies to lower prices.
According to industry estimates, the build-up in non-urea fertiliser stocks is estimated at eight million tonnes due to poor offtake in the past two seasons. Chidambaram said the Fertiliser Ministry would put in place a mechanism to ensure that lower MRP is fixed by the manufacturers and the benefits of decline in global prices were passed on to farmers.
“If there is any violation or contravention, there will be a monitoring mechanism that will take corrective step to ensure that the benefit is passed on to farmers,” he noted.
Without waiting for the Government’s announcement, fertiliser makers have been tagging bags with the MRP of last rabi season printed on them. With the Government announcing the subsidy cut, the companies are expected to revise the prices accordingly.
The reduced prices of complexes such as DAP and MoP may help boost their usage, as farmers had shifted to cheaper urea during rabi and kharif seasons in last two years following the rise in prices.
The Government had decontrolled the prices of non-urea fertilisers in April 2010, after which the prices of the complexes had almost doubled on account of rise in global raw material costs and a weakening rupee.