2nd July 2022 (6 Topics)

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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

After an 80% increase last year, fertilizer costs have increased by over 30% since the start of 2022.
Responsible factors: The rise was driven by factors like
- surging input costs
- Supply interruptions brought on by sanctions (Russia and Belarus)
- export restrictions in China

Since 2018, the highest possible retail price for a 50 kg bag of urea has been Rs. 268. The cost of a 50 kg bag of urea is now 400.

India’s dependence on fertilizers

India's requirement for fertilizer is largely met by imports.
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.
Given India's low level of self-sufficiency, fluctuations in the world market for fertilizers will inevitably have a big effect on the country.
In any event, imports of fertilizer had been increasing even prior to the emergence of the Russia-Ukraine war because of interruptions caused by the outbreak.
Between 2018-19 and 2020-21, there was an almost 8 percent increase in total fertilizer 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.
Fertilizers have been deemed critical commodities by the GoI.
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.
- It was later expanded to include fertilizers with phosphate and potassic content (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 marked the start of the "Product-based subsidy" system.

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. a rise in the yield of soybeans, corn, rice, sugarcane, and red and white rice. Negligible diversion towards non-agricultural purposes by the farmers.	Ensure food security Nutritious Food for all Better production

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