Agri Business

Due to global price rise, India’s fertiliser subsidy bill increased from ₹79,529 crore during Budget Estimate to ₹1,40,122 crore in Revised Estimates for 2021-22

India’s efforts to further reduce fertiliser import this year will largely depend on enhanced domestic production of urea and reduction in consumption of Di-ammonium Phosphate (DAP) as the overall overseas purchases dropped by 9 per cent during 2021-22.

According to the latest data, the total import of fertilisers during the last fiscal year dropped to 175.36 lakh tonnes (lt) from a record 193.21 lt in the previous year. However, while there was a drop in import of urea, Muriate of potash (MOP) and complex (combination of N, P and K) varieties, the overseas purchase of DAP increased by almost 12 per cent to 54.62 lt last year.

The urea import declined 7 per cent to 91.36 lt while that of MOP by 45 per cent to 17.68 lt and complex fertiliser by 16 per cent to 11.70 lt.

“As the urea is completely controlled by the government, its import and consumption largely depends on availability, while in case of potash and phosphorous, the selling price of these two fertiliser determine the consumption,” said an industry official explaining the import and consumption relationship.

The Gorakhpur plant is likely to start producing urea at full capacity of 12.7 lt per annum this year, while the Ramagundam plant (Telangana) last week started production at full capacity (12.7 lt). Sindri (Jharkhand) and Barauni (Bihar) plants, if able to start production anytime this year, may add some quantity to overall domestic production, pegged at nearly 251 lt (as per 2021-22 official estimates).

Muriate of potash

Last year, while the government increased subsidy on DAP twice in the year (additional ₹20,491 crore), there was no such hike effected for MOP resulting in DAP being available at ₹1,200/bag, but MOP’s maximum retail price went up to ₹1,700/bag. As the country is 100 per cent dependent on imported MOP, companies reduced purchases amid a slide in demand and higher prices, said the official. In the case of DAP, only about 20 per cent is produced domestically, while the remaining are imported.

The government has recently “agreed” to a small hike in MRP of DAP this year to ₹1,350/bag by raising the subsidy, but it has not been done in the case of MOP, where companies have been “asked” informally to sell at last year’s rates, though ₹759/bag subsidy has been approved, sources said. Announcing the subsidy for the current year’s Kharif season on April 27, the government had said it would bear ₹2,501/bag subsidy on DAP.

The MOP price globally has increased to $590/tonne in March and is currently around $600 against $273-280/tonne during April-November 2021. In the case of DAP, it is now $1,000-1,050/ tonne compared with $924/tonne in March and $804/tonne in November 2021. Fertiliser prices started an abnormal increase from October-November 2021. On the other hand, urea price declined to $596/tonne in March from a high of $990 in December 2021, though it is said to have shot up again to about $700 now, industry sources said.

Because of this global price rise, India’s fertiliser subsidy bill increased from ₹79,529.68 crore during Budget Estimate to ₹1,40,122.32 crore in Revised Estimates for 2021-22. The government has allocated this year’s subsidy at ₹1,05,222.32 crore for FY23, but a recent report by rating agency Crisil has said it may increase to ₹1,65,000 crore.

Published on May 09, 2022