India’s fertilizer subsidy may cross ₹3 lakh crore if West Asia crisis prolongs
The amount may increase further if international prices increase later in the year, the official said on condition of anonymity. Experts called for the removal of control or the introduction of quantitative restrictions.
The ongoing West Asian crisis has increased international prices of essential soil nutrients such as urea and di-ammonium phosphate (DAP), as well as critical raw materials such as ammonia, sulfur, phosphoric acid and natural gas. Experts said the sharp fall of the rupee against the dollar also added to the burden.
India imports more than 80% of its DAP requirement and domestic production of urea meets only 30-35% of the total demand, making it the largest importer of chemical fertilisers.
Unlike most commodities, fertilizers in India are sold below cost to ensure affordability to farmers, and the government gives post-sale subsidies to companies.
According to Ashok Gulati, distinguished professor at the Indian Council for Research on International Economic Relations (ICRIER), India’s dependence on fertilizer imports is around 68-70%.
Urea import costs have nearly doubled in a matter of weeks due to supply disruptions caused by the effective closure of the Strait of Hormuz, while the government’s subsidy burden has also increased sharply.Fertilizer That Reduces Risk
Experts question the reason for the pressure on fertilizer prices.
According to an article published by ICRIER on Monday, the extremely low sales prices of urea (nitrogen) compared to phosphate (DAP) and potassium fertilizers (MOP) have led to the unbalanced use of fertilizers and the diversion of urea to non-agricultural purposes.
India sells urea at less than 10% of its actual cost, making it the preferred option of farmers.
