New Delhi: India’s fertilizer subsidy bill is set to overshoot the budgeted amount of ₹1.75 trillion by ₹50,000 crore to ₹2.25 tn in the current financial year, chemical and fertilizers minister Mansukh Mandaviya said on Wednesday.
As part of the overall amount, the Cabinet approved a subsidy of ₹1.08 trillion for the 2023-24 kharif season in a meeting.
In the Union budget 2023-24, the subsidy on fertilizers had been cut to ₹1.75 trillion from the last year’s revised estimates of ₹2.25 trillion.
The Union cabinet approved ₹38,000 crore for phosphatic and potassic (P&K) fertilizer subsidy. This will take the total fertilizer subsidy for the 2023-24 (April-September) Kharif season to ₹1.08 trillion, including ₹70,000 crore of urea subsidy earmarked in the Budget for the Kharif season 2023-24.
“A total of ₹1.08 trillion will be spent on fertilizer subsidy for the Kharif season (April-September),” he said after the cabinet meeting.
The price of urea at present is ₹276 per bag and Diammonium phosphate (DAP) is ₹1,350 per bag. The subsidy is likely to benefit about 120 million farmers.
“The situation in 2022-23 was such that fertilizer subsidy had to be increased sharply due to the Russia’s invasion of Ukraine,” Mandaviya said, adding that the government had ensured rising global fertilizer prices did not hurt India’s farmers.
Fertilizer prices skyrocketed last year after sanctions against Belarus, a major producer. Belarus supported Russia in its war against Ukraine. This prompted global fertilizer firms to boost purchases and ship massive amounts of fertilizers to avoid supply chain issues and trade restrictions in export markets like Russia. Urea futures contracts jumped by around 85% in the two weeks following the outbreak of the war in Ukraine on 24 February last year. This was mainly due to high prices of energy, including natural gas, well before Russian troops set foot in Ukraine. The price of urea typically tracks that of natural gas quite closely.
Urea, which is the most used fertilizer in the world, provides nitrogen to crops to promote their green, nutritional leafy growth, in part by aiding the process of photosynthesis. It is also manufactured from ammonia that requires significant quantities of natural gas to produce.
Black Sea urea prices in March and April last year had gone up to $908 and $925 per tonne, while US DAP prices hit $938.13 per tonne in March and $954 per tonne in April 2022. Black Sea urea prices plunged 52% between May 2022 and January 2023, while the decline in US DAP prices during the same duration has been 33.8%.
Despite the spike in fertilizer prices globally last year, the government did not hike the maximum retail price (MRP) of fertilizers, thus requiring a higher subsidy. As per the 2023-24 Budget documents, the revised estimate for the fertilizer subsidy given in 2022-23 is ₹2.25 trillion. However, Mandaviya said on Wednesday that the Centre’s fertilizer subsidy bill in the previous financial year ended March was ₹2.54 trillion.
The fertilizer minister said there will be no change in the MRP of fertilizers this year.
“The Cabinet decision will have the two-fold benefit of ensuring availability of DAP and other P&K fertilizers to farmers at subsidized, affordable and reasonable prices in the Kharif season. This will also ensure rationalisation of subsidy on P&K fertilizers,” the government said in a statement.
Mandaviya further said the government has sufficient fertilizer stocks of about 15 million tonnes (MT) for the kharif season.
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