Government cuts subsidy on phosphatic and potassic fertilisers for 2013-14

The Cabinet today slashed subsidy on phosphatic and potassic (P&K) fertilisers such as DAP for this fiscal in view of falling global prices, a move that could help the government save Rs 5,000 crore.

Although the subsidy has been reduced, the government expects the maximum retail price (MRP) of Di-ammonium phosphate (DAP) and Muriate of Potash (MoP) to come down by Rs 1,500 and Rs 1,000 per tonne, respectively.

The decision on the Fertiliser Ministry's proposal to fix Nutrient-Based Subsidy (NBS) rates for P&K fertilisers for 2013-14 fiscal was taken by the Cabinet.

"The Cabinet has taken a very important decision on P&K fertilisers. The total subsidy outgo for P&K fertilisers for 2013-14 will be lower by 15 per cent because of decline in global prices. Actually outgo of subsidy cost will depend on consumption," Finance Minister P Chidambaram told reporters here after Cabinet meet.

According to sources, the Fertiliser Ministry estimates subsidy on P&K fertilisers to come down by Rs 4,500-5,000 crore to around Rs 27,500 crore in this fiscal.

The government is implementing the NBS policy on P&K fertilisers since April 2010, under which it announces a fixed subsidy for 22 grades of P&K fertilisers and their MRP is freed.

Giving details of subsidy for P&K grades for this fiscal, Chidambaram said that the subsidy of nitrogen has been reduced to Rs 20.875 per kg from Rs 24 per kg in the last year.
     
Similarly, subsidy for phosphate has been cut to Rs 18.679 per kg from Rs 21.804 per kg last year, while that on potash has been slashed to Rs 18.333 per kg from Rs 24 per kg.

However, the subsidy for sulphur has been kept unchanged at Rs 1.677 per kg for this fiscal.
     
"This (subsidy) will be the lower than the rates approved for 2012-13. As a result, subsidy on DAP will be Rs 12,350 per
tonne and on MoP it would be Rs 11,300 per tonne," he said.
     
On retail prices, the Minister said that the government "expects that MRP will now be lower by Rs 1,500 per tonne for DAP and by Rs 1,000 for MoP."

The Fertiliser Ministry will put in place a mechanism to ensure lowered MRP is fixed by manufacturers and benefit of reduction in global price is passed on to farmers, he added.
     
"If there is any violation or contravention, there will be a monitoring mechanism which will take corrective step to ensure that the benefit is passed on to farmers," he noted.

The country requires around 29-30 million tonnes of DAP, MoP and complex fertilisers. The bulk of it is imported.