The fertiliser sector has been in the doldrums for long. Many new policy initiatives taken by the government in the recent past have failed to the meet the desired objectives. This has made the fertiliser sector unattractive for potential investors. Virtually no fresh funding has been committed in over a decade towards setting up new units to produce urea, the main and only fertiliser that the country can produce wholly indigenously. Urea imports, consequently, are on the rise. The government has not been able to bring out an effective policy for either dispensing subsidy or ensuring for the new units steady supply of natural gas, the most sought-after feedstock for urea manufacture.
Phosphatic fertilisers, which are largely imported, face a different kind of problem. It is somewhat similar to what is encountered by potassic fertilisers, which are also entirely sourced from abroad. Though both these fertilisers have been freed from price control, with provisions for fixed concession on their sales, the move has come at a time when international prices are ruling firm and the rupee is depreciating. This has caused shortages and a price spike in the domestic market as well. The farm gate prices of di-ammonium phosphate (DAP), for instance, have nearly doubled in the last five to six months, making it unaffordable for many farmers. Any decline in the consumption of phosphatic and potassic fertilisers may jeopardise crop production prospects in the current rabi season.
What is worse, the total fertiliser subsidy burden on account of all the three major plant nutrients – nitrogen, phosphorus and potash – may swell in 2011-12 to Rs 80,000-90,000 crore, against the budgetary provision of merely Rs 49,900 crore. Even the additional allocation for fertiliser subsidy through supplementary budgetary grants of around Rs 13,780 crore seems inadequate to meet the subsidy payment requirement in full. A build-up of subsidy arrears, as seems quite likely, will inevitably put a strain on the industry’s financial resources. Indeed, most of the fertiliser sector’s ills can be attributed to a leadership vacuum, half-hearted and piecemeal reforms, and flawed implementation of even the well-intended moves. Strangely enough, many of the policy decisions have, of late, been taken not by the fertiliser ministry but by either the group of ministers or the finance ministry or even the Planning Commission. There have been instances when the fertiliser minister, M K Alagiri, has made public his dissent over the new policy prescriptions. Freeing urea prices and bringing this key fertiliser under the ambit of the nutrient-based subsidy regime can be a case in point. The group of ministers, headed by Finance Minister Pranab Mukherjee, is understood to have given its nod for this much-needed reform last August, but its implementation is still held up because the fertiliser ministry is disinclined to give its green signal. Expecting a smooth going in this sector under such circumstances seems futile. Nor can there be any hope for the government to fulfil its commitment made in the 2009 Budget speech to unshackle the fertiliser sector in phases. Nothing short of a revamped policy apparatus to tackle the fertiliser sector’s woes can perhaps put this house in order.
