Stop skirting fertiliser reform

The Prime Minister unveiled a five-point agenda for ushering in a technology-led second green revolution in India. One of these is the issuing of a soil health card (SHC) to every farmer, with recommendations for fertiliser use.

But will this help address the persisting imbalance in fertiliser use?

Though the Economic Survey recognised the seriousness of the problem, the Budget was silent on any policy steps to address it.

To get maximum crop yield from fertiliser use and maintain soil health, a farmer needs to apply all three major nutrients, namely nitrogen (N), phosphate (P) and potash (K) in the right mix.

As a rule of thumb, agronomists recommend use ratio of 4:2:1. Ideally, it has to be customised to soil and crop specific situations. Unfortunately, government policies, which make P and K fertilisers — dia-ammonium phosphate (DAP), muriate of potash (MOP), single super phosphate (SSP) and others — very expensive and urea — the main source of N — artificially cheap , have led farmers to use an excess of N and less of P and K. This led to increasing imbalance and the ratio at one point had deteriorated to 8.5:3.1:1 (1998-99). It remains heavily imbalanced at 8.2:3.2:1 (2012-13).

The fertilisers policy revolves around the twin principles of controlling maximum retail price (MRP) at a low level and assuring producers a retention price (RP) which is higher. The difference is reimbursed as subsidy. Initially, all fertilisers (urea, DAP/complex and SSP ) were covered under a uniform policy dispensation of retention price scheme (RPS).

In 1991, faced with an economic crisis, India approached the IMF/World Bank who insisted on elimination of fertiliser subsidy within three years as a precondition for extending financial support. To comply with this, on August 25, 1992, the Government decontrolled DAP/complex fertilisers and SSP and abolished subsidy.

However, within five weeks, subsidy was resurrected as ad-hoc concession. Controls on MRP too were revived, although indirectly. To begin with, States exercised control, after which the baton passed on to the Central Government.

From April 1, 2010, these fertilisers were brought under the nutrient-based scheme (NBS). Under NBS, the Government gives ‘uniform’ subsidy to all manufacturers, expressed as ₹ per unit nutrient N, P, K and sulphur (S). Initially, producers were given freedom to fix the MRP but subsequent actions severely undermined this.

Since 2013, the Government has been fixing ‘reasonable’ MRPs and manufacturers who charge more are penalised by being denied subsidy for the differential amount or the concerned product being excluded from NBS.

At the other extreme, urea is treated as a holy cow. The policy governing it has remained unaltered since 1992, thus creating a serious anomaly vis-à-vis decontrolled P and K fertilisers. Although a recommendation was made in 2012 to bring it under NBS and a committee asked to work out the modalities, nothing has come of it to date.

Continued dithering over reforms in urea on the one hand and drastic reduction in subsidy on P and K fertilisers on the other has produced a deadly cocktail. This has spiked the prices of P and K fertilisers three-four times since 2010 even as the MRP of urea increased by a meagre 10 per cent. Currently, DAP sells at ₹22,500 a tonne — four times the urea price of ₹5360 a tonne.

The Government should act before things slip further out of control. Prime Minister Narendra Modi has talked of giving a bitter pill now to enable‘ achchhe din ’ later. He should implement NBS for urea without delay.

The June 26, 2013 memorandum fixing ‘reasonable’ MRPs should be withdrawn. It is anathema to pricing freedom which must be preserved for the scheme to deliver best results. Needless to say, such controls should be avoided while implementing a similar scheme for urea.

While the fertiliser industry has been pitching for these reforms for over three years, farmers need to be goaded to accept the bitter pill in the hope of long-term benefits by reducing imbalance in fertiliser use, increasing crop yield, improving soil health and putting less load on the environment as nutrients are better utilised by plants.

The writer is a policy analyst