Fertiliser famine

The 100-year-old fertiliser industry has seldom faced as many problems as it is beset with today. Virtually nothing seems to be going well for this sector, which, at one stage, had made the country nearly self-sufficient in urea, the only fertiliser that can be produced wholly indigenously. Phosphatic and potassic fertilisers have to be imported or manufactured locally from imported raw material and intermediaries. Most people are not aware that fresh domestic investment in this industry has dried up totally, and some of the committed foreign investment has also been either withdrawn or put on hold. As such, no fresh production capacity has been added for over seven long years, from 1999, barring some marginal accretions on account of plant revamping. The utilisation of the existing capacity, too, has dropped due to idling or closure of some urea plants. The inevitable result is that the gap between demand and domestic supply has been growing, and imports have soared. This year will see an all-time high import of 5 million tonnes of urea, up from just 2 million tonnes last year. The import of diammonium phosphate (DAP), too, is projected to be around 3 million tonnes this year, against 2.4 million tonnes last year.

This import dependence is compounded by operational glitches: the imports were not lined up in time, causing a paucity of this key farm input in several pockets at the time of the rabi crop planting. It is astonishing that, on the one hand, there is much talk of improving agricultural productivity (which needs inputs on time), while, on the other, slipshod work acts as a banana peel under the country's heel.

Then there is the subsidy problem. At an operational level, the subsidy to be paid to manufacturers because of the failure to raise the farm-gate prices of fertilisers, is not being done in time, resulting in mounting arrears and a consequential liquidity crunch for the industry. Surprisingly, successive Union Budgets have tended to make inadequate provisions for subsidy payment. Even in the current fiscal, the gap is sought to be made up through supplementary grants, with the subsidy bill estimated to pile up to over Rs 32,000 crore.

Most of this is due to the largely ill-advised and ad hoc policies followed over the years. Matters have not improved under the present fertiliser minister, Ram Vilas Paswan; if anything, things have got worse. This is reflected, among other things, in the time it is taking to decide on the new pricing norms, which were supposed to have come into force eight months back, in April. The uncertainty on this count has made it difficult for the industry to draw up production and import plans.

Under the circumstances, what is needed urgently are not only workable solutions to these problems (almost all of which are man-made) but also a long-term policy that can put the fertiliser industry on a firm footing. The piece-meal approach of somehow coping with micro issues, leaving the long-term problems unaddressed, will not work. Also imperative is the revival of the stalled process of introducing phased decontrol of this sector; this is as relevant today as it was when first mooted in the early 1990s. After all, agricultural production cannot be expected to grow at the desired pace if the demand for a key input like fertilisers remains unmet.