New Delhi: After frequent delays, the cabinet committee on economic affairs (CCEA) will finally meet next week to decide on new subsidy rates for crop nutrients based on phosphorous and potash, offering relief to fertilizer makers and farmers.
The committee, which will meet on 2 May, is to set the subsidy that fertilizer firms will receive under the so-called nutrient-based subsidy policy, or NBS, in the fiscal year that began on 1 April, a department of fertilizers official said.
The official, who requested anonymity, said the subsidy rates will be implemented retrospectively from the start of the fiscal year. The NBS was introduced with effect from 1 April 2010 for all non-urea fertilizers, marking a shift from a product-based subsidy system to a regime in which the government subsidized the nutrient content of fertilizers that had their prices deregulated by the government.
The policy was based on the premise that it would promote balanced fertilization of soil, boost agricultural productivity and deliver better returns to farmers.
The NBS rates for the current fiscal year had been expected to be announced before 1 April, but this was delayed because the cabinet is yet to discuss it, said S. S. Nandurdikar, managing director of Paradeep Phosphate Ltd.
The meeting had been deferred for a variety of reasons, including the resignation of fertilizer minister M.K. Alagiri in March.
According to the NBS policy, fertilizer makers have to clearly print the maximum retail price, along with applicable subsidy, on fertilizer bags. Old subsidy rates expired on 31 March while the new ones haven’t been decided because of the delayed CCEA meeting.
Excess inventory of non-urea fertilizers has cushioned fertilizer makers and farmers against the repurcussions of the delay in setting new subsidy rates.
“Eventually the dealers and farmers will suffer if no fresh supply comes in,” said an analyst with a Mumbai-based brokerage firm who tracks the fertilizer sector and spoke on condition of anonymity. He didn’t want to be named.
Subsidy rates for diammonium phosphate (DAP), a widely used phosphorous fertilizer, and muriate of potash (MoP) may be cut this year by 15-20% on the back of falling international prices, said the analyst.
Subsidy for the previous fiscal for DAP was Rs 14,350 per tonne and for MoP Rs. 14,400 per tonne.
“Demand for phosphatic fertilisers, particularly DAP, is estimated to have fallen down by 35-40% in 2012-13,” said Nandurdikar of Paradeep Phosphate. “The main reason for this is government’s policy of fixing retail urea prices at unsustainably low level compared to DAP by way of its subsidy policy. This has led to not only DAP demand shrinking but also led to unbalanced use of nutrients, leading to issues like soil health and farm productivity.”