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Business News/ News / India/  Lower prices trigger fertilizer subsidy cut
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Lower prices trigger fertilizer subsidy cut

Cabinet approves ₹22,303 cr fertilizer subsidy for winter crops

The subsidy will be provided to the fertilizer companies as per approved and notified rates. (HT)Premium
The subsidy will be provided to the fertilizer companies as per approved and notified rates. (HT)

NEW DELHI : The Union cabinet on Wednesday cleared a 22,303-crore subsidy for phosphatic and potassic fertilizers for the rabi season that runs till the end of March. While the amount is sharply lower than the previous year, the government assured that farmers will remain protected since international fertilizer prices have fallen, reducing the need for hefty support.

The cabinet also approved fresh rates under the nutrient-based subsidy (NBS) scheme for NPK (nitrogen, phosphorus, potassium) fertilizers. The NBS scheme sets fixed subsidies for fertilizers other than urea, depending on their nutritional content. The rates are revisited annually. In last year’s rabi season, the cabinet approved total NBS subsidies of 51,875 crore, including support for indigenous fertilizers through freight subsidy.

“The subsidy will continue because the government does not want any increase in the international fertilizer prices to affect farmers of the country. For the last two years, the government has continued to provide more subsidy to the farmers," Anurag Thakur, minister of information and broadcasting, said after a cabinet meeting.

Graphic: Mint
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Graphic: Mint

Rabi crops are sown in winter and harvested in spring. Wheat, barley, mustard, chana (gram), masur (lentil), peas, potato, tomato, beet, cabbage, garlic, onion, cumin, coriander, linseed, sunflower and cauliflower are some popular rabi crops that are sown around mid-November.

“The subsidy will ensure that farmers get fertilizers at last year’s prices," the minister said, answering a question on whether the government should have passed on the benefit of lower international fertilizer prices to farmers instead of slashing subsidies by about 50% this year.

The cabinet set NBS rates for fertilizers for the 1 October 2023 to 31 March 2024 rabi season rates that are substantially lower rates than last year’s. The new rates are 47.2 per kg for nitrogen ( 98 last year), 20.82 per kg for phosphorus ( 66.93), 2.38 per kg for potash ( 23.65) and 1.89 for sulphur (6.12).

The subsidy will be provided to the fertilizer companies as per approved and notified rates so that fertilizers are made available to farmers at affordable prices, an official statement said.

The decision rationalizes the subsidy on phosphatic and potassic fertilizers, ensuring effective and efficient utilization of government resources, it added.

Di-ammonium phosphate or DAP, another key soil nutrient, will get an additional subsidy of 45 per kg, so that the per bag cost would be the same as last year at 1,350 per bag. Similarly, muriate of potash (MoP) would cost 1,655 per bag, lower than 1,700 per bag. NPK rates will also remain the same at 1,470 per bag, while single super phosphate or SSP will be available at 500 per bag, and freight subsidy for its transportation will continue, Thakur said.

In 2022-23, fertilizer subsidies hit a record 2.25 trillion. In the 2023-24 budget, the government allocated 1.75 trillion for fertilizer subsidy, and in the first five months, it spent 55% of the total allocation. The government allocated a subsidy of 1.08 trillion for the 2023-24 kharif season that ended in September, including 70,000 crore subsidy for urea and 38,000 crore for DAP and other fertilizers.

Fertilizer prices showed a mixed trend in September. While global average urea prices increased slightly on month to $570 per tonne in the last week of September from $563 a tonne during the same period of August, DAP prices fell to $703 from $730, and the prices of potash declined to $508 from $518 during the same period.

Separately, the Cabinet Committee on Economic Affairs approved the Jamrani Dam Multipurpose Project of Uttarakhand under the Pradhan Mantri Krishi Sinchayee Yojana-Accelerated Irrigation Benefit Programme, which will cost 2,584 crore. The project envisages the construction of a dam near Jamrani village across river Gola, a tributary of river Ram Ganga, in Nainital, Uttarakhand. The dam will feed the existing Gola barrage through its 40.5 km length canal system and 244 km long canal system, which was completed in 1981.

“Central support of 1,557.18 crore will be provided to Uttarakhand for completion of the project at an estimated cost of 2,584.10 crore by March 2028," Thakur said.

The project will create additional irrigation of 57,065 hectares (9,458 hectares in Uttarakhand and 47,607 hectares in Uttar Pradesh) in Nainital and Udham Singh Nagar districts of Uttarakhand and Rampur and Bareilly districts in Uttar Pradesh. Apart from building two new feeder canals, 207 km of existing canals are to be renovated, and 278 km of pucca field channels are also to be taken up under the project. In addition, the project also envisages hydropower generation of 14 MW and provision of 42.70 million cubic metre (mcm) of drinking water to Haldwani and nearby areas, benefiting more than 10.65 lakh population.

A substantial part of the irrigation benefits of the project would flow to neighbouring Uttar Pradesh, and the cost or benefit sharing between the two states will be done as per a memorandum of understanding (MoU) signed in 2017. However, drinking water and power benefits shall be available entirely to Uttarakhand.

In another decision, the Cabinet also approved a memorandum of cooperation (MoC) signed in July between the ministry of electronics and information technology and the ministry of economy, trade and industry of Japan on Japan-India semiconductor supply chain partnership.

The memorandum intends to strengthen cooperation between the two countries towards the enhancement of the semiconductor supply chain, recognizing the importance of semiconductors for the advancement of industries and digital technologies. It will remain in force for five years and build on the bilateral government-to-government and business-to-business cooperation on opportunities to advance resilient semiconductor supply chains and leverage complementary strengths.

“Recognizing the importance of semiconductor for the advancement of industries and digital technologies, this MoC would provide for the enhancement of semiconductor supply chain resilience," the government statement said. The memorandum also envisages improved collaboration leading to employment opportunities in the field of IT.

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Puja Das
Puja Das is a New Delhi based policy reporter covering food, farm, fertiliser, water, and climate policies for Mint. Puja reports on farmers' distress and how the agriculture sector is impacting India's rural economy and policy initiatives to help meet the pledges made at COP27. Puja holds a post-graduation degree in Broadcast Journalism from the Indian Institute of Journalism & New Media, Bangalore.
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Updated: 26 Oct 2023, 12:36 AM IST
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