Nitrogen-potash-sulphur get higher subsidy hike than phosphate in new round

Hike is valid till September 30. Consequently, per tonne increase in subsidy in DAP and its products has also been lower than different grades of NPKS

After the latest round of subsidy hikes for non-urea fertilisers, an anomaly several industry players said had apparently cropped up in favour of Di-Ammonia Phosphate (DAP) over NPKS in subsidy allocation seems to have been somewhat corrected.

This divergence has been a source of bother for several big players in the non-urea complex fertiliser space, some of whom also complained of being compelled to work in less than optimum capacity.

Capacity utilisation dropped because realisations on NPKS suffered as subsidy allocation did not fully cover the production cost which has risen sharply due to global factors while on the other hand there was an unofficial cap on retail price, industry players said.

In the last two rounds of subsidy hikes first in May 2021 and thereafter in October 2021, several industry players complained that in terms of absolute allocation of subsidy DAP was favored over NPKS under the Nutrient-based subsidy regime. This is because the per kilogram subsidy for phosphorus (P) was higher than potassium, nitrogen and Sulphur.

This was done despite it being commonly believed that between DAP and NPKS, the latter is a much more balanced plant nutrient than the former. DAP is the second most consumed fertiliser in the country, after urea.

So, in May 2021, when the Central government first raised the subsidy on non-urea fertiliser under the Nutrient-based subsidy regime, the subsidy on phosphorus (which is the main constituent in DAP) was raised to Rs 45.323 per kg from Rs 14.888 per kg (an increase of over 200 per cent), while that of nitrogen, potash and Sulphur was fixed at much lower at Rs 18.789 per kg, Rs 10.116 per kg (P) and 2.374 per kg for Sulphur.

Thereafter, in October 2021, the Centre again extended the subsidy on NPK under the nutrient-based subsidy regime for another six months.

However, as an ad-hoc arrangement, it decided to give an extra subsidy of Rs 8769 per tonne to DAP while the same extra subsidy for some products of NPK was settled at Rs 2000 per tonne.

Following the two consecutive hikes in non-urea fertiliser subsidy favouring DAP over NPKS, several industry players had complained of correcting this anomaly which was hurting their performance as well.

After persistent effort and in view of sharp increase in NPKS fertiliser rates both in their raw materials and also in finished products, the Centre in its latest round of subsidy hikes announced a few days back for non-urea fertilisers, reversed some of the trend.

This time it reserved the maximum increase in subsidy for nitrogen (NPK) of almost 390 per cent from Rs 18.789 per kg to straight to Rs 91.96 per kg, while potassium(K) subsidy was raised from Rs 10.116 per kg to Rs 25.31 per kg, a hike of 150.2 per cent.

Sulphur subsidy was raised from Rs 2.374 per kg to Rs 6.94 per kg, an increase of 192.3 per cent.

In contrast, subsidy on phosphorus (P) – the main ingredient for DAP-- was raised from Rest 45.323 per kg to Rest 72.74 per kg, an increase of 60.5 per cent (see chart).

This hike is valid till September 30, 2022. Consequently, per ton increase in subsidy in DAP and its products has also been lesser as compared to different grades of NPKS.