Sizeable Reduction In Fertiliser Subsidies Unlikely: Crisil

A sizeable reduction in fertiliser subsidies, at least in the near to medium-term, is rather unlikely in the backdrop of ample international experience of fall in foodgrain production following withdrawal of subsidies, according to the Credit Rating Information Services of India Ltd. Fertiliser subsidies would be removed in a phased manner rather than an abrupt withdrawal, Crisil said in a release.

The fertiliser industry accounts for bulk government subsidies and despite international pressures to phase out subsidies, it has increased from around Rs 4800 crore during 1990-91 to Rs 7800 crore in 1996-97. The partial decontrol of non-nitrogenous fertiliser had led to an increase in the prices of these fertilisers resulting in a reduction in their consumption and thus the undesirable skew in the soil nutrient mix.

Several revisions in the ad-hoc subsidies on the decontrolled fertiliser have failed to fully correct this skew.

A gradual increase in farmgate prices would have the twin effects of reducing subsidy bill as well as improve the present distortion in nutrient consumption in favour of nitrogenous fertilisers, Crisil said.