Looming fertiliser shortage

It would push up subsidy bill significantly

The Ukraine war-driven disruption in supplies and escalation in prices of fertilisers in the international market has ramifications for India going far beyond the inevitable surge in fertiliser subsidy. It has affected the domestic availability of these key farm inputs, resulting in their black marketing in several states. Though the government has invoked the Fertiliser Control Order to penalise hoarders and others indulging in malpractices, decontrolled fertilisers like di-ammonium phosphate (DAP) and muriate of potash (MOP) are still being sold at exorbitant prices at many places. If it leads to any decline in fertiliser use, which may well happen, crop yields can drop in the next season, affecting farmers’ income and pushing up prices of agricultural commodities, fuelling inflation.

Globally, the supplies of all types of fertilisers have shrunk due to interruption from the war-hit Black Sea region and reduction in exports by many European countries and China. It has posed formidable problems for countries like India, which depend heavily on imports for meeting their burgeoning requirement of yield-enhancing nutrients. India’s import dependence is about 25 per cent for urea, nearly 90 per cent for phosphates (either raw material or finished products), and 100 per cent for potash. Though the local output of urea is likely to improve substantially, thanks to revival of the defunct fertiliser plants at Ramagundam, Sindhri, Barauni and Gorakhpur, thereby, narrowing the supply gap to a considerable extent, the same cannot be said about phosphatic and potassic fertilisers. Russia, Belarus and Ukraine, which together account for about a third of fertiliser traded in the global bazaar, meet a sizeable part of India’s plant nutrients requirement, especially that of DAP and MOP.

Stoppage of shipments from this region, coupled with the cut in fertiliser exports by China, a major supplier of urea to India, has created difficulties in securing enough supplies to meet the demand for the ensuing kharif cropping season. In fact, many private importers have already begun exploring possibilities of buying the stuff from Canada and other countries, though at the ruling high prices. If the government intends to shield the farmers against the high cost of imported fertilisers by raising the price discount (read subsidy) on decontrolled phosphoric, potassic and mixed fertilisers, its total subsidy bill is bound to outstrip the budgeted amount of Rs 1.05 trillion for 2022-23 by a huge margin. Even in the current fiscal, the total fertiliser subsidy outgo is likely to touch a record Rs 1.3 trillion. Given the unprecedented spike in international fertiliser prices prior to the Russia-Ukraine war and, more so in its aftermath, the additional subsidy burden next year might go far beyond the official reckoning of Rs 10,000 to Rs 15,000 crore.

Thus, what India needs is to intensify its ongoing efforts to become self-sufficient in urea as soon as possible and, more importantly, explore ways and means to reduce import dependence on phosphatic and potassic fertilisers. Luckily, some phosphate deposits have been discovered in different parts of the country, notably Rajasthan, Central peninsula, Hirapur area in Madhya Pradesh, and Cuddapah basin in Andhra Pradesh. The possibilities of using them to produce phosphatic fertilisers need to be ascertained without delay. Besides, long-term strategic arrangements need to be made with reliable suppliers of potassic fertilisers to ward off any future shocks.