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High fertiliser prices shock farmers

  • Published
    2nd Jul, 2022
Context

The recent rise in global prices has severely affected the farmers across India, the second largest importer of fertilizers.

About

Key-highlights

  • Fertiliser prices have risen nearly 30 per cent since the beginning of 2022, following last year’s 80 per cent surge.
  • Responsible factors: The rise was driven by factors like
    • surging input costs
    • supply disruptions due to sanctions (Belarus and Russia)
    • export restrictions in China

The maximum retail price for a 50 kilogram bag of urea has been Rs.268 since 2018. This price has gone up to 400 for a 50kg bag of urea.

India’s dependence on fertilizers

  • India depends heavily on imports for meeting its fertiliser needs.
  • India imports four types of fertilisers:
    • Urea
    • Diammonium phosphate (DAP)
    • Muriate of potash (MOP)
    • Nitrogen-phosphorous-potassium (NPK)
  • Industry experts say more than half the urea the country consumes comes from other nations like Canada, Israel, Jordon and Russia.
  • With low self-sufficiency, volatility in global fertiliser supplies is bound to have a significant impact on India.
  • In any case, due to pandemic-related disruptions, fertiliser imports had been rising even before the Russia-Ukraine conflict emerged.
  • Between 2018-19 and 2020-21, there was an almost 8 per cent increase in total fertiliser imports to nearly 203.3 lakh tonnes from 188.4 lakh tonnes.

Fertilizer policy in India

  • Since independence, the Government of India (GoI) has been regulating the sale, price, and quality of fertilizers.
  • GoI has declared fertilizers as an essential commodity.
  • GoI issued the Fertilizer Control Order (FCO) under the Essential Commodities Act, 1957.
  • No subsidy was paid on Fertilizers till 1977 except Potash for which subsidy was paid only for a year in 1977.
  • Retention Pricing Scheme (RPS): Introduced for nitrogenous fertilizers in 1977.
    • Later, it was extended to phosphatic and potassic fertilizers (Including Imported fertilizers).
    • In this, the difference between retention price (cost of production as assessed by the government plus 12% post-tax return on net worth) and the statutorily notified sale price was paid as a subsidy to each manufacturing unit.
    • This was the beginning of the “Product-based subsidy” regime.

Impacts of price rise on India

  • Shortage of raw materials for farmers
  • Crop destruction
  • Food insecurity
  • Soil degradation
  • Economic slowdown
  • Pressure on government’s funds due to subsidies

Benefits of fertilisers

For Environment

For Farmers

For Common People

  • Improvement in soil health.
  • Reduction in usage of plant protection chemicals.
  • Reduction in pest and disease attack.
  • An increase in yield of paddy, sugarcane, maize, soybean, Tur/Red Gram.
  • Negligible diversion towards non-agricultural purposes by the farmers.
  • Ensure food security
  • Nutritious Food for all
  • Better production
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