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| The soil for change | | A sensible new policy for fertiliser pricing |
| Business Standard / New Delhi Feb 22, 2010, 00:15 IST |
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Finally, they have bitten the bullet on fertiliser subsidy. For the past three years, the Union government has agonised on the issue of mounting expenditure on this account and has not had the courage to cut the subsidy. While Finance Minister Pranab Mukherjee announced his intent to introduce a nutrient-based subsidy (NBS) in his last Budget Speech, he has finally shown courage to do so on the eve of this year’s Budget presentation. Whatever fertiliser minister Alagiri’s politically motivated reservations, this policy initiative has got the Cabinet’s approval. Even as the government proposes to free some fertilisers from price control, it has promised to hike urea price, which remains under government control, by 10 per cent. Urea price was last revised in February 2002. Twice before in the past eight years, successive governments had proposed doing this but had to roll back the move in the face of organised opposition. This time too the jury is out on whether or not the government will succumb to party political pressure. The argument that farmers need this subsidy has been rubbished enough. The truth is that there are far too many vested interests who have prospered in the name of farmers. With the fertiliser subsidy ballooning in the past few years, overshooting budgetary provisions by wide margins, huge unpaid subsidy arrears have been built up, impairing the financial health of the industry. No fresh investment in capacity addition has, as a result, come in this sector for nearly a decade now. That is why the industry has welcomed the NBS regime, which will lead to direct payment of subsidy to farmers. While farmers may object to higher urea prices, there would be more rational application of fertilisers which is good in itself, with subsidies encouraging excessive fertiliser use.
The NBS system implies fixing subsidy on the basis of the nutrient content of a fertiliser rather than on a per tonne or per bag basis. Agricultural scientists and fertiliser industry representatives have been seeking this change in subsidy computation for a long time because it is advantageous for all stakeholders in the fertiliser sector. The present system of product-based subsidy has done immense harm to agriculture by tilting the price advantage in favour of urea. As a result, farmers tend to use more of urea and less of other fertilisers, contributing to a nutrient imbalance that has lowered soil fertility and crop yields. Besides, the present system holds no incentive for the fertiliser manufacturers to add micro-nutrients like sulphur, zinc, iron, calcium and magnesium to fertilisers. There has been a decline in crop productivity in India because the soil is deficient in these elements. The NBS system allows these nutrients to also benefit from the subsidy. This will encourage the industry to produce innovative fertiliser products having nutrient combinations customised to meet the needs of different crops and soil conditions. Farmers will be able to choose appropriate products according to their specific needs and reap better harvests. This measure, along with the freedom given to manufacturers to fix farm gate prices for their products, will promote competition to the ultimate benefit of farmers.
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