Fertilising policy

Pricing must ensure balanced use and a reasonable return

A rational fertiliser policy always seems to be sabotaged by the very minister who is expected to implement it. Union Fertiliser Minister M K Alagiri has come out against the idea of decontrolling urea prices, ostensibly in the name of the farmer. The nutrient-based subsidy (NBS) system, as opposed to product-based subsidy, is unworkable if producers do not have the freedom to fix sale price. The fundamental objective of this system is to promote balanced use of fertilisers and rationalisation of the ever-mounting fertiliser subsidy. What the fertiliser minister is disregarding is that the NBS regime has been working well ever since it was introduced for phosphatic (P) and potassic (K) fertilisers in April 2010 and was subsequently extended to several other plant nutrients, barring N (urea). So why not urea?

Noting a wide price disparity between urea and non-urea fertilisers, a government committee headed by Planning Commission member Saumitra Chaudhuri recommended that urea be decontrolled. Instead of securing the government’s imprimatur for this recommendation, the minister concerned is seeking to delay action. The uncertainty on price reforms in urea is discouraging new investment in the fertiliser industry. As a result, though the demand for urea is rising, its supply is being constrained owing to absence of new investment. There has hardly been any expansion in production capacity for nearly a decade. Consequently, urea imports have risen sharply, from a meagre 0.64 million tonnes in 2004-05 to a whopping 5.21 million tonnes in 2009-10. The government’s efforts to ease import dependence by wooing fresh investment in domestic capacity addition came a cropper when the new investment promotion policy, notified in September 2008, failed to receive any response. So, unless urea is treated on a par with phosphatic and potassic fertilisers and is subjected to the same kind of policy prescription (chiefly NBS, price decontrol and decanalisation of imports), any significant increase in domestic urea production capacity seems unlikely. Nor can the objective of introducing NBS and other reforms in the non-urea sector be fully served.