Govt hikes FY12 NBS subsidy on phosphorous, potash fertiliser

The government has hiked the subsidy it provides on the basis of the phosphorous and potash nutrient content of fertilisers to Rs 32.33 and Rs 26.75 per kg, respectively, for the 2011-12 fiscal.  

This is the third time the government has effected an upward revision of the subsidy on phosphorous (P) and potash (K) under the Nutrient-Based Subsidy (NBS) policy in the last few months with a view to absorb high global prices so that farm nutrients can be provided at affordable prices and food inflation can be contained.

At the beginning of the current fiscal, the government had fixed the subsidy on phosphorous at Rs 20.30 per kg and on potash, it was Rs 21.38 per kg for the 2011-12 fiscal. In March, the subsidy on these two nutrients (P and K) was revised upward to Rs 29.40 per kg and Rs 24.62 per kg, respectively.

According to the notification issued early this month, the government has again raised the subsidy on phosphorous (P) to Rs 32.33 per kg and on potash (K) to Rs 26.75 per kg. The subsidy on other nutrients, nitrogen (N) and sulphur, was revised marginally higher to Rs 27.15 per kg and Rs 1.67 per kg, respectively, it said. 

he subsidy on P and K has been increased following a rise in the benchmark price of urea, di-ammonium phosphate (DAP) and muriate of potash (MOP), based on which the government pays subsidy to fertiliser firms.

The benchmark price for DAP and MoP has been increased to $612/tonne and $420/tonne, respectively, from the current level of $580/tonne and $390/tonne.

This (revision in benchmark prices) will enable companies to import fertilisers to ensure adequate supply in 2011-12. This would also help farmers buy fertilisers at subsidised rates at the maximum retail price. The budgetary provision for phosphatic and potassic fertilisers for the 2011-12 fiscal is Rs 33,500 crore.

However, the total subsidy outgo on potassium and phosphatic fertilisers for the ongoing fiscal will depend on the actual sale of fertilisers. Under the NBS Policy, the Centre announces subsidies on each nutrient upon commencement of each fiscal, which are valid for the whole year.