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2nd July 2022 (6 Topics)

High fertiliser prices shock farmers

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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