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Context: According to data from the Ministry of Chemicals and Fertilisers, the sale of urea and di-ammonium phosphate (DAP) increased by 3.7% and 16.9%, respectively, from April-October 2022 over the previous year.
Two ambitious schemes of the Government of India – Soil Health Card and mandatory neem-coating of urea, were supposed to promote the balanced use of fertilisers.
However, the annual consumption of urea (30 to 35 mt in the last 5 years) and DAP have grown over the years.
This means, instead of providing a balanced mix of plant nutrients based on soil testing and crop requirements, Indian farmers are applying only urea and DAP – both containing 46% N and P, respectively.
Rise in sales of not only urea but also DAP: This year, not only have urea sales gone up by 3.7 per cent during April-October over the same period of 2021, it has grown even more, at 16.9 per cent, for di-ammonium phosphate (DAP).
Sales are not in correct proportion: It has come even as sales of all other fertilisers including complexes containing nitrogen (N), phosphorus (P), K (potash) and sulphur (S) in different proportions have fallen.
Urea and DAP are the dominant choice of Indian farmers: In other words, instead of balanced use of plant nutrients based on soil testing and specific crop requirement, Indian farmers are effectively applying just urea and DAP both high-analysis fertilisers containing 46 per cent N and P respectively.
It arises because the Centre directs manufacturers/importers to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of supply, which is much higher. In the case of urea, the difference is reimbursed to the manufacturers as a subsidy on a ‘unit-specific’ basis.
In the case of phosphate and potash (P&K) fertilizers (call them non-urea fertilizers), it fixes ‘uniform’ subsidies on a per-nutrient basis for all expected manufacturers and importers to deduct this from the cost to arrive at MRP.
The subsidy goes to fertilizer companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates.
From March 2018, a direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers.
Each retailer has a point-of-sale (PoS) machine linked to the Department of Fertilisers’ e-Urvarak DBT portal.
Anybody buying subsidized fertilizers is required to furnish his/her Aadhaar unique identity or Kisan Credit Card number.
The quantities of the individual fertilizers purchased, along with the buyer’s name and biometric authentication, have to be captured on the PoS device.
Only upon the sale getting registered on the e-Urvarak platform can a company claim subsidy, with these being processed on a weekly basis and payments remitted electronically to its bank account.
The high subsidy on urea and DAP makes them much cheaper for farmers relative to other fertilizers.
The maximum retail price (MRP) of urea is currently fixed at Rs 5,628 per tonne.
Companies are obliged to sell at this administered price, with their higher cost of production or imports being reimbursed as a subsidy by the Centre.
The other fertilizers are technically “decontrolled” since April 2010, with the Centre only paying a fixed per-tonne subsidy to ensure “reasonable levels” of prices.
Urea is retailing at a fourth of the price of packed common salt, DAP has also become far cheaper than popular NPKS complexes.
The use of nitrogen (N), phosphorous (P) and potassium (K) in the country has over the last few years sharply deviated from the ideal NPK use ratio of 4:2:1.
Urea and DAP are high-analysis fertilizers, containing more than 30 percent of any single nutrient.
Urea has 46 percent N, while DAP has 46 percent and also 18 percent N.
Low pricing and high sales of these two fertilisers result in nutrient imbalance owing to their use could have implications for soil health, ultimately affecting crop yields.
The government should replace subsidies on individual fertiliser products with a flat per-hectare cash transfer
Every farmer can have an e-wallet account, which can be used only for the purchase of fertilisers.
Maintaining a stock of decontrolled fertilisers to ensure no unexpected price increases.
Under-pricing of urea (a historical phenomenon) and DAP (recent) is a product of subsidy-induced market distortions. Thus, concerns over soil nutrient imbalances should take precedence over electoral politics.
By: Shubham Tiwari ProfileResourcesReport error
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