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Why India needs a fresh fertilizer policy

The Ukraine war spiked the government’s spending on food, fertilizer and fuel subsidy by nearly 70%.
The Ukraine war spiked the government’s spending on food, fertilizer and fuel subsidy by nearly 70%.

Summary

As the government is expected to come out with a new fertilizer policy, Mint examines its implications.

A task force to examine production and promotion of bio-fertilizer and organic fertilizers has already been set up under the Niti Aayog. As the government is expected to come out with a new fertilizer policy, Mint examines its implications.

How much fertilizer does India consume?

Total consumption of fertilizers between April and mid-December 2022 was 40.146 million metric tonnes (mmt), with production of 32.076 mmt and imports of 12.839 mmt. Some steps undertaken by the government to improve availability of fertilizers include: Assessment of state-wise requirement every month; 100% neem coating of urea, which increases nutrient efficiency; monitoring of crop yield and soil health; and online monitoring of the movement of fertilizers through the integrated Fertilizer Monitoring System. The gap between demand and production was met through timely imports.

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What is the impact of the current policy?

Heavy subsidies have prompted many farmers to use chemical fertilizers like urea, which leads to higher productivity, but affects soil fertility in the long run. Excessive and inefficient use of fertilizers leads to nutrient losses to the environment and could also result in drinking water contamination and impact human lives as a result of unsafe storage practices, as per a UN report. Also, with the subsidy being released directly to companies, technology-inefficient companies are being protected. While attempts have been made to reform the fertilizer policy, they had to be rolled back after pressure from various quarters.

What has been the trend in government expenditure?

The Ukraine war spiked the government’s spending on food, fertilizer and fuel subsidy by nearly 70%. For 2023-24, the fertilizer ministry might seek budgetary support of 2.5 trillion subsidy - outgo for FY23 has already crossed 2 trillion. Russia being a major exporter of liquefied natural gas --critical input for manufacturing of urea -- has also led to higher prices.

What steps has the Centre taken in 2022?

The department of fertilizers disbursed subsidies for urea and nutrient-based subsidy, and implemented direct benefit transfer. It also implemented the ‘One Nation One Fertilizers’ scheme which aims to ensure timely supply of fertilizers. This also eliminates the dilemma of choosing from the many brands available, by introducing a single brand. The existing village, block/sub district/taluk and district level fertilizer retail outlets are being converted into model fertilizer retail outlets.

What will the new policy address?

Lower duty on imported phosphoric acid to raise the competitiveness of local fertilizer manufactures, and an incentive for promoting organic fertilizers, could be proposed. A task force on bio-fertilizer and organic fertilizers has already been set up under Niti Aayog. Considering the long-term interests of agriculture and the effects of using inorganic fertilizers, saving a huge amount on account of subsidy support is a step in the right direction.

Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH.

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