Govt cuts subsidy on P&K fertiliser to Rs 21,274 cr for FY17

Government today reduced the subsidy on phosphatic and potassic (P&K) fertilisers to an estimated Rs 21,274 crore for the next fiscal due to decline in global prices, a move that may save the exchequer around Rs 5,000 crore.
The reduction in subsidy will not result in rise in retail prices of the two major P&K fertilisers, DAP and MoP, an official source said.
The Cabinet Committee on Economic Affairs (CCEA) has fixed the nutrient-based subsidy rates (NBS) for P&K fertilisers for 2016-17, taking into account "decreasing trend in global prices of finished fertlisers and raw materials," an official statement said.

"At the same level of consumption of P&K fertilisers (about 310.44 lakh tonnes) during 2016-17 as in 2015-16, the total subsidy implication on P&K fertilizers for 2016-17 at proposed rates works out to be about Rs 21,274 crore," it added.
The subsidy on nitrogen and phosphorous has been reduced by about Rs 5 per kg, while a marginal cut has been made on potash. This could lead to a saving of about Rs 5,000 crore to the exchequer, the source said.
Accordingly, the subsidy on Diammonium Phosphate (DAP) has come down to Rs 8,945 per tonne from Rs 12,350 per tonne in the current fiscal. Subsidy on Muriate of Potash (MoP) has reduced to Rs 9,280 per tonne from Rs 9,300 in 2015-16, a source said.

The CCEA today approved Rs 15.85 per kg for Nitrogen (N), Rs 13.24 per kg for phosphorous (P), Rs 15.47 per kg potash (K) and Rs 2.04 per kg for sulphur (S), the statement added.

In the current fiscal, the subsidy on N is Rs 20.88 per kg, P is Rs 18.68 per kg, K is Rs 15.50 per kg and S is Rs 1.68 per kg.
The government has been implementing NBS policy for decontrolled P&K fertlisers since April 2010.
Under this policy, the subsidy on P&K fertilisers is announced annually for each nutrient i.E. Nitrogen, Phosphorous, Potash and Sulphur on per kg basis which is converted into subsidy per tonne depending upon the nutrient content in each grade of the fertilisers.

These rates are determined taking into account global and domestic prices of P&K fertilisers, exchange rate, inventory level in the country etc.
While the government announces fixed subsidy on NPK fertiliser, the manufacturers are free to decide the maximum selling price on these complex fertilisers.