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With prices going through the roof due to the ongoing Russia-Ukraine crisis, the Centre today approved a subsidy of Rs 60,939.23 crore for non-urea fertilisers for the first six months of this financial year. The move would enable companies to continue selling the vital soil nutrients at affordable rates to farmers.
This is almost 45.23 per cent more than the Budget Estimates for non-urea fertilisers for the entire Fy-23
After today’s support, companies will be able to sell one bag of Di-Ammonia Phosphate (DAP) at Rs 1350 because the Centre will absorb the remaining cost of the same, estimated to be around Rs 2501 as subsidy.
Till last year, the per bag subsidy on DAP was Rs 1,650, thus marking an almost 50 per cent increase in Fy-23.
Earlier, this month, fertiliser companies had raised DAP prices by Rs 150 per bag from Rs 1200 to Rs 1350.
For NPKS, the prices were increased in the range of Rs 20-110 per 50 kg bag depending upon the grade.
“After today’s subsidy support, most companies will manage to hold on to the hikes or else they would have had to further raise prices of DAP and NPKS as input costs have been continuously rising,” a senior industry official said.
DAP is the second most consumed fertiliser in volume terms in the country after urea.
For other complex fertilisers such as various grades of NPKS, SSP and MOP, the subsidy rates have been determined as per the NBS formula. The subsidy for urea for the 2022-23 financial year is still awaited.
The subsidy approved for both DAP and NPKS (various grades) of fertilisers is almost 45.23 per cent more than the subsidy allocated for non-urea fertilisers as per the Budget Estimates of FY23.
So, for non-urea fertilisers, the Central government had allocated a subsidy of Rs 42,000 crore in the Budget for the entire Fy-23, while in today’s decision it has allocated Rs 19,000 crore extra that too just for the first six months of this financial year till September.
Under the NBS, which is being implemented since April 2010, a fixed rate of subsidy (in Rs per kg basis) is announced for nutrients namely Nitrogen (N), Phosphate (P), Potash (K) and Sulphur (S) by the government on an annual basis.
The subsidy rates per kg for the nutrients N, P, K, and S are converted into per tonne subsidies on the various P&K fertilisers covered under the NBS.
In the case of urea, the Centre fixes the maximum retail prices and reimburses the difference between the maximum retail price and production cost in the form of subsidy.
Meanwhile, ever since the Russia-Ukraine war, urea production cost has jumped due to high gas rates while the price of non-urea fertilisers has also been badly impacted due to shortage of key raw materials and also finished products.
According to ratings agency ICRA, for every $1/MMBtu rise in pooled gas price, the subsidy requirement for the urea sector could rise by around Rs 4,500-5,000 crore.
For non-urea fertilisers, though companies have raised prices in the retail markets very recently, it was not enough to cover their high production cost.
Among non-urea fertilisers, India imports almost all of its potassium chloride (MOP) fertiliser requirements, while the import component in di-ammonium phosphate (DAP) is around half of the annual consumption.
In case of nitrogen-phosphorus-potassium (NPKS) fertilisers, the country domestically produces around 80 per cent of the annual requirement while in case of urea a third of its annual demand needs to be imported.
According to trade and industry sources, Russia- Ukraine and Belarus account for almost 20 percent of phosphoric acid imported into India.
Russia is also one of the world’s largest exporters of ammonia and 10-15 per cent of India’s annual ammonia supplies come from Russia. That apart, almost 20 percent of the finished MOP supplies come from neighbouring Belarus.
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