Several committees have gone into issues concerning the fertiliser sector ever since the industry producing this vital farm input slipped into doldrums in the early 1990s. However, their reports have largely been treated with disregard. It would be a pity if the latest report on reforms in the fertiliser sector, submitted to the cabinet secretary by the committee headed by former Agriculture Secretary T Nanda Kumar, also meets the same fate. For, this report makes several recommendations that are well-meaning and aimed, quite aptly, at carrying the reforms process to its logical destination of total decontrol. Not surprisingly, therefore, the report has called for extension of the nutrient-based subsidy (NBS) scheme to urea, the only fertiliser kept out of this scheme so far for inexplicable reasons, and freeing its pricing. The committee has rightly observed that there is a strong case for reducing the subsidy on urea and allowing a higher price to discourage its unproductive use. The underlying idea, obviously, is to strike a balance between the prices of urea vis-à-vis those of phosphatic and potassic fertilisers to ensure need-based application of all the three major plant nutrients — nitrogen (N), phosphorous (P) and potash (K).
Worsening price parity between urea and other fertilisers after the introduction of the NBS in April last has actually tended to exacerbate the imbalance in their use to the detriment of soil health and its fertility. Moreover, decontrolling urea prices is desirable for reining in the overall fertiliser subsidy bill, which has been overshooting the budgeted figures year after year. The subsidy bill for this financial year, too, seems set to exceed the budgetary provision of Rs 52,000 crore by a big margin. Current estimates put it at between Rs 75,000 crore and Rs 80,000 crore. Going a step ahead, the Nanda Kumar panel has suggested higher subsidy under the NBS for key micronutrients like sulphur, boron and zinc, which have been depleted from the soils. Their deficiency in the soil does not allow fertilisers to show the desired effect on crop yields. It, therefore, makes sense to offer micronutrient-specific fiscal incentives to encourage the industry to churn out fertiliser products fortified with these micronutrients.
The government’s reluctance to allow urea manufacturers to fix the farm-gate prices stems largely from the fear of adverse political fallout from such a move. But this apprehension does not seem well-founded. It may be recalled that the government had increased urea prices by 10 per cent in April, at the time of switching over to the NBS regime for decontrolled fertilisers, but without any backlash from politicians or farmers. This could be due to the fact that the minimum support prices of foodgrain have been stepped up liberally in the past few years and the prices of other agricultural commodities, too, have been ruling at record highs. Besides, even farmers now seem to realise that rationalisation of fertiliser prices and ensuring adequate availability of soil-specific fertiliser products would lead to balanced use of plant nutrients and result in better yields to compensate for the higher prices of fertilisers. If the government still intends to play safe, it can at least begin the decontrol process with some 100 districts which account for nearly 50 per cent of the country’s total fertiliser consumption. The smooth transition in these districts may later spur the government to extend it to the whole country.
