Fertilizer subsidy to be down by 15%

In a measure that would give relief to India’s subsidy bill, the Union Cabinet today gave nod to the  Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) fertilizers for the year 2013-14. The rates are expected to cut down fertilizer subsidy by about 15% in the current financial year compared  to 2012-13.

After oil and food, the fertilizer sector is the third largest contributor to the country’s subsidy bill. According to the Budget proposals, the Centre wanted to cut down subsidy bill on these three to Rs 2.21 lakh crore for the financial year 2013-14, as compared to more than Rs 2.47 lakh crore during the previous fiscal.  

The country had entered into NBS regime on April 1, 2010. Based on this about 22 grades of P&K fertilizers were freed. Accordingly, the Cabinet has approved per kilo gram NBS rates of fertilizer nutrients nitrogen (N), phosphorus (P), potassic (K) and sulfur (s) for the financial year 2013-14 at Rs 20.875, Rs 18.679, Rs 18.333 and Rs 1.677, respectively. “Based on these rates, the subsidy on Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP) would be Rs 12,350 PMT and Rs 11,300 PMT, respectively. The per Metric Tonne subsidy on other P&K fertilizers covered under the Nutrient Based Subsidy Policy shall also be as per the nutrient content in that grade,” the ministry said in a statement today. The pricing would be with effect from April 1, 2013.

With this, the price of DAP and MOP is expected to be reduced by a minimum of Rs 1500 and Rs 1000 per MT, respectively from the current level which will provide relief to the farmers.  

The Cabinet has also decided that the reasonability of maximum retail price of P&K fertilizers fixed by the companies in the year 2012-13 shall also be looked into by the Government for making recovery of subsidy, wherever necessary.

Under the NBS policy applicable to fertilizers other than Urea, while the government decides a fixed subsidy on each grade of fertilizers covered by the policy, the importers and manufacturers decide the domestic prices of these fertilizers. They are allowed to fix the MRP at reasonable level.

As the domestic demand for P&K fertilizers is largely met through import of finished fertilizers and the raw materials, the domestic price should normally move in tandem with movement of prices in the international market.

“However, in view of the recent trend of falling international prices having no corresponding decrease in domestic prices, the Cabinet has decided that it shall henceforth be mandatory for all fertilizer companies to submit certified cost data while claiming subsidy,” the statement said. In case MRP is not found to be reasonable, subsidy may be restricted or denied.