The Union Cabinet on Wednesday raised the subsidies for DAP and some other non-urea fertilisers by Rs 14,775 crore to keep the price of crop nutrients for farmers low despite the rising costs. The move will also help in providing relief to the farmers amid the pandemic.
After urea, Di-Ammonium Phosphate (DAP) fertilizers are the most widely used one in the country.
Last month, the Centre decided to increase subsidy on DAP fertilisers by 140 per cent. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi.
Briefing the media, Minister of State for Chemicals and Fertilisers Mansukh Mandaviya said on Wednesday that the Cabinet Committee on Economic Affairs (CCEA) has approved increasing the subsidy amount for DAP fertilisers for the benefits of farmers.
"Farmers will continue to get DAP at the old rate of Rs 1,200 per bag," he said.
The move will help in ensuring that farmers get the key soil nutrient at the old rate despite the surge in global prices.
One bag has 50 kilograms of the fertilisers.
According to him, the subsidy for DAP fertilisers has been increased to Rs 1,200 per bag from Rs 500 per bag to provide relief to farmers.
The minister also said the additional subsidy burden on the exchequer will be Rs 14,775 crore.
The government has allocated nearly Rs 79,600 crore for fertiliser subsidies in the 2021-22 Budget.
Last year, the actual price of DAP was Rs 1,700 per bag, on which the central government was giving a subsidy of Rs 500. The companies were therefore selling the fertiliser to farmers for Rs 1,200 per bag.
With rise in global prices, the actual price of DAP reached Rs 2,400 per bag. In order to ensure that the farmers get DAP at the old rate of Rs 1,200 per bag, the Centre has decided to increase the subsidy to Rs 1,200 per bag.
Mr Mandaviya said that in the case of urea, the MRP (maximum retail price) is fixed while the subsidy amount keeps changing. On an average, he said the government is providing Rs 900 per bag subsidy on urea.
However, he said the government provides a fixed amount of subsidy on non-urea fertilisers, including DAP.
According to an official statement, the CCEA has "approved the proposal of the Department of Fertilisers for fixation of nutrient based subsidy (NBS) rates for P&K (phosphatic & potassic) fertilisers for the year 2021-22 (till the present season)".
Now, the subsidy rates for N (nitrogen) is Rs 18.789, P (phosphorus) is Rs 45.323, K (potash) is Rs 10.116 and S (sulphur) is Rs 2.374. The subsidy is for each kilogram of the fertiliser.
The NBS rate on P stood at Rs 18.78 per kg last year.
The government said it has already asked all fertiliser companies to sell their old stocks of DAP at the old prices only.
"Additionally, it was agreed by the government that country and its citizens (including farmers) are passing through unprecedented times due to sudden surge in second wave of COVID pandemic.
"... considering this crisis of pricing of DAP in India as an extraordinary situation & distress for the farmers, government has increased the subsidy rates under NBS Scheme as a special package for farmers in such a way that MRP of DAP (including other P&K fertilisers) can be kept at the last year's level till the present kharif season," the statement said.
This has been done as an one-time measure to reduce the hardships of farmers, it added.
"The estimated additional subsidy burden for such an arrangement will be around Rs 14,775 crore," the statement said.
Stating that international prices are expected to come down in few months, the government said it may review the situation and decide on subsidy rates at that point of time.
The centre is making available fertilisers, namely urea and 22 grades of P&K fertilisers (including DAP) to farmers at subsidised prices through fertiliser manufacturers/ importers.
The subsidy on P&K fertilisers is being governed by NBS Scheme with effect from April 1, 2010.
"In accordance with its farmer friendly approach, the government is committed to ensure the availability of P&K fertilisers to the farmers at affordable prices. The subsidy is released to fertiliser companies as per NBS rates so that they can make available fertilisers to farmers at affordable price," the statement.
In the last few months, the government said that international prices of raw materials of DAP and other P&K fertilisers have increased sharply.
Despite this sharp increase, DAP prices in India were initially not increased by the companies. However, some companies increased the DAP price in the beginning of this financial year, the statement said.
"The government is fully sensitive to the concerns of farmers also and is already taking steps to tackle the situation so that farming community can be saved from the effects of this price rise of P&K fertilisers (including DAP)," the statement said.