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The government on Wednesday sharply raised subsidy on a key fertilizer to protect farmers from the impact of the commodity’s price rise in global markets.

The subsidy to farmers on diammonium phosphate (DAP) has accordingly been stepped up from 500 a bag to 1200 a bag. This will allow fertilizer companies to continue to sell the product at the old price, said an official statement. Recently, global prices of phosphoric acid and ammonia used in diammonium phosphate production have gone up by 60% to 70%, it said.

The old retail price excluding subsidy was 1,900 a bag, which would have touched 2,400 now due to commodity price inflation. “With today’s decision, farmers will continue to get a DAP bag for 1,200," said the statement.

The move implies an additional spending of 14,775 crore in the kharif season, the statement said.

As per the current policy, fertilizer subsidy is fixed by the government in advance while the retail price may see some fluctuation depending on international price of the commodity which impacts the cost of sellers. Unlike in the case of subsidised cooking gas, in which case the subsidy is paid to the consumer, fertilizer subsidy is given to the fertilizer company which in turn sells the commodity at the reduced price. The government tracks the sales through point-of-sale machines installed at retail outlets.

The decision to step up subsidy was taken at a meeting chaired by Prime Minister Narendra Modi which reviewed fertilizer prices and noted the increase due to rising global prices of phosphoric acid and ammonia. The Prime Minister stressed that farmers should get fertilisers at old rates despite the rise in prices, the statement said.

Modi remarked that his government was committed to farmers’ welfare and will take all efforts to ensure that farmers do not have to face the brunt of price-rise, the statement said.

The Centre spends about 80,000 crore on subsidies for chemical fertilisers every year. The statement called the decision to raise subsidy the second major decision in farmers’ interest, after directly transferring Rs. 20,667 crores in farmers’ account under the income support scheme this month.

The government’s decision to open up the farm sector to private investment has in recent past led to farmers protesting along the borders of Delhi.

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