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Cabinet okays ₹61k-cr kharif fertiliser relief
The Union Budget presented on February 1 had pencilled in a subsidy outgo of ₹1.05 lakh crore.
The Union Cabinet on Wednesday approved a fertiliser subsidy of ₹60,939 crore for the upcoming Kharif or summer-sown season to cushion prices, as rates continue to soar due to global supply chain disruptions.
The substantial increase in subsidy will help compensate fertiliser companies for selling their products to farmers at lower-than-market prices. It will cover phosphatic, potassic and diammonium phosphate group of crop nutrients.
The midterm revision would push up the Centre’s fertiliser subsidy bill to nearly ₹2 lakh crore, a record high, during 2022-23, up from ₹1.6 lakh crore in previous fiscal, according to market projections. The Union Budget presented on February 1 had pencilled in a subsidy outgo of ₹1.05 lakh crore.
Millions of farmers are awaiting the summer monsoon, which activates in June, to start sowing a range of crops, such as rice, gram, cotton and pulses, which account for half of the country’s annual food output.
In FY22, too, the government originally allocated ₹79,530 crore as fertiliser subsidy but had to raise it to ₹1.4 lakh crore because of higher global rates.
India, the world’s largest buyer of urea and diammonium phosphate, has been hit by a sharp rise in global fertiliser prices due to supply disruptions. Costlier raw materials, higher freight charges, and tighter coal and natural gas supplies due to the Ukraine war are likely to keep fertiliser prices elevated this year.
Official data show that imported urea prices have soared to $930 a tonne in April 2022 from $380 a tonne a year ago, which is a 145% increase. Rates of DAP and MoP (murate of potash) have risen to $924 and $590 a tonne in April 2022, up by 66% and 116% compared to a year ago.
“The subsidy per bag of DAP was ₹512 and has been now been increased to ₹2,501 so that the burden of price increase doesn’t fall on the farmer,” information and broadcasting minister Anurag Thakur said, briefing reporters.
An interministerial committee recommended revision of subsidy rates for fertilisers based on nitrogen, phosphorous, potassium and sulphur for Kharif 2022 based on average international prices in March 2022 as a “special case this year”.
“Over 85% of the subsidy arrears could be contributed by urea. This is because pooled gas price, (which is) a blend of domestic gas and imported LNG considered for billing to fertilisers plants, had shot up more than 75% last fiscal, and is expected to remain elevated for most part of this fiscal because of the Russia-Ukraine conflict,” said Nitish Jain, director of Crisil Ltd.
