Fertilizer subsidy likely to touch ₹2.25-lakh crore in FY24

Shishir Sinha Updated - May 17, 2023 at 09:52 PM.

This is higher than BE but lower than actual of FY23; ₹1.08-lakh crore fertilizer subsidy for FY24 khariff

The Government on Wednesday said total subsidy on fertilizer could touch ₹2.25-lakh crore during FY24. This includes ₹1.08-lakh crore for Khariff season of FY24.

However, Chemical & Fertiliser Minister Mansukh Mandaviya ruled out retail price revision of fertlizers including urea. Budget allocation towards fertilizer subsidy for FY24 is ₹1.75-lakh crore, while actual expenditure during previous fiscal (2022-23) was ₹2.54-lakh crore. Accordingly, overall subsidy in FY24 expected to exceed BE, but less than actual of FY23. This is happening despite softening of global prices of fertiliser.

“Softening of global prices will have an impact on domestic prices with a lag of 5-6 months. As of now, companies have stock of raw material or products sourced at higher prices, which means more subsidy to be required so that farmers should not suffer,” Mandaviya said.

Prices decline

The price of imported urea has decreased to $330 per tonne (FOB from China) in the latest tender, compared with an average of $361 in March and $722 in May 2022. The global price of DAP, which reached a peak of about $950 per tonne last year, has now dropped to $515-520. Additionally, MoP has declined to $422 per tonne from $590 in March 2023.

Further, Mandaviya added that prices of neither urea nor of DAP, NPK or MoP will be revised upwards despite higher subsidy. As of now, the government is giving ₹2,126 per bag (50 kg) of urea as subsidy, while the maximum retail price is ₹276 per bag. The last revision took place over 13 years ago when the then government decided to increase the MRP of urea to ₹5,310 per tonne from ₹4,830 with effect from April 1, 2010.

Urea has the maximum tonnage among all fertilizers used in the country and unlike other categories, the MRP is statutorily fixed by the Centre.

The MRP is exclusive of taxes and charges towards neem coating. The difference between the delivered cost of fertilizers at the farmgate and MRP payable by the farmer is given as subsidy to the fertilizer manufacturer/importer by the government. In case of non-urea fertilizers, the government pays subsidy to makers on the basis of nutrient-based rates and companies can revise the MRP.

Mandaviya announced that a subsidy of ₹70,000 crore will be allocated for urea during the FY24 kharif season. Additionally, a subsidy of ₹38,000 crore will be provided for NBS to ensure the availability of 25 grades of Phosphatic and Potassic (P&K) fertilizers to farmers at subsidised prices.

He further said considering the total subsidy amount of ₹2.54- lakh crore for FY23, the government spends ₹8,909 on fertilizer subsidy for each hectare of cultivable land and ₹21,233 for each farmer.

Published on May 17, 2023 13:26

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