FY24 fertiliser subsidy to overshoot BE by Rs 46,000 crore: Minister

The government’s subsidy expenditure on fertilisers for FY24 could be Rs 2.25 trillion, as against the Budget Estimate of Rs 1.79 trillion, fertiliser minister Mansukh Mandaviya said on Wednesday.

“The global prices of fertilisers have declined in the recent months. However, its takes about six months for the lower prices to reflect in the actual subsidy expenses, because of inventories held by the fertiliser companies,” he added.

Fertiliser subsidy in FY23 stood at an all-time high of Rs 2.53 trillion, owing to the spike in global commodity prices.

Earlier in the day, the Cabinet approved subsidy of Rs 38,000 crore for phosphatic and potassic (P&K) fertilisers for the kharif 2023 season (April-September) under the nutrient-based subsidy (NBS) mechanism. The subsidy rates for the two fertilisers, which are mostly imported, have been fixed after taking into consideration the fall in international prices.

Including an estimated Rs 70,000 crore subsidy on urea, the most commonly used fertiliser, the government will spend Rs 1.08 trillion towards fertiliser subsidy in the summer season, Mandaviya said. The subsidy on P&K for the current kharif season is much lower than about Rs 61,000 spent during last kharif season.

The NBS rates for the two types of fertilisers had to be increased steeply last year, due to the rise in global prices. In the year before, Rs 57,150 crore was spent by the government for P&K sales during both the summer and winter (rabi) seasons.

Retail prices of P&K fertilisers, including diammonium phosphate (DAP) were ‘decontrolled’ in 2010 with the introduction of a ‘fixed-subsidy’ regime as part of NBS policy. However, the government was forced to increase the subsidy to ensure that farmers get adequate quantity of the nutrients at affordable rates. The subsidy is likely to benefit about 120 million farmers.

“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 during Kharif season and will also ensure rationalization of subsidy on P&K fertilizers,” the government said in statement.

In terms of volume, imports account for a third of domestic soil nutrients consumption of around 65 million tonne annually.

Official sources said that imported urea prices which rose to $ 980/tonne in April, 2022 had declined to around $ 330/tonne currently.

India meets about 75-80% of the volume of consumption of urea from domestic production while the rest is imported from Oman, Egypt, the UAE, South African and Ukraine.

Global prices of DAP have dropped to $550/tonne currently from $925/tonne prevailed in April, 2022. The country imports about two thirds of its annual requirement of 10 million tonne of DAP. “We would like to see the DAP prices falling to around $ 300-350/tonne range prevailed two years back,” Mandaviya said.

Currently, the price of urea to the farmer is Rs 276 per bag (against weighted average actual cost of Rs 2,400 per bag), and the price of DAP (diammonium phosphate) is Rs 1,350 per bag (against actual cost of Rs 4,000 per bag).

According to a fertiliser ministry assessment, each farmer received Rs 21,233 as soil nutrient subsidy in FY23. The government provided a fertiliser subsidy of Rs 8,909 per hectare in the last fiscal.

Currently sale of all subsidised fertiliser to farmers or buyers is currently made through 0.26 million point of sale (PoS) devices installed at outlets since March 2018. Beneficiaries are identified through Aadhaar number, Kisan Credit Card and other documents.

The government releases subsidies on various fertilizers to the companies on the basis of actual sales made by the retailers to the farmers.

NBS rates have also been determined for various nutrients i.e. Nitrogen (N), Phosphorus (P),Potash (K) and Sulphur (S) for Rabi Season 2022-23 (Jan-March 2023).