Experts believe it is because of the “cheaper food paradigm”, the production of more and more food at cheaper rates, which countries across the world including India followed. The “intensified agricultural production”—with heavy reliance on fertiliser, pesticides, energy and water—degraded soil fertility and ecosystems, and also reduced production capacity, which, in turn, brought farmers under debt.
Fertilizer is a magic wand for the farmer to push his productivity and production but could be a sceptre for the government for it has to procure the produce for distribution under the national food security scheme, for exports, etc. It is the same ‘magic wand’, which helped the country sail through ship-to-mouth to the present overflowing granaries. But imagine what would be the fate of our farmers if this ‘magic wand’ is broken and what would be the position of the Indian government if it fails to supply fertilizers to farmers in time. It appears, with the Russia-Ukraine war, fertilizer crunch is looming large on India, since we import maximum fertilizers from countries like Russia, Ukraine and Belarus.
There is no doubt that fertilizer availability during the rabi season remained comfortable. It was comfortable since there was no conflict between Russia and Ukraine, geopolitical situation was cool and there were no supply-chain disruptions. But now that the conflict is on even after nearly two months and there are supply chain disruptions at the Black Sea, farmers are worried about the ensuing kharif season.
Import Dependent
The conflict has turned the plans of the government topsy-turvy since Russia is the world’s second largest exporter of Muriate of Potash (MOP). We import one-third of MOP from Belarus and Russia. Ukraine is the third largest supplier of urea to India.
But the more worrying fact is that the government of India (GoI) is showing laxity in entering into tie-ups with other countries for supplies and showing little interest in pushing domestic production to make good the loss it may suffer in getting fertilizers from Russia, Ukraine, Belarus, Estonia, Latvia, etc. Not just this, we also need to see how the GoI insulates farmers from unrelenting global prices of urea, natural gas, Di-Ammonium Phosphate (DAP), MOP, etc, since allocation for fertilizer subsidy for 2022-23 is just Rs 1 lakh crore, which is not even 50% of the cost estimates by experts.
Of the 356.53 lakh tonnes of urea requirement in 2021-22, India imported 98.3 lakh tonnes (highest-ever). For 2022-23, we need nearly 370 lakh tonnes given the expected good South-West monsoon and addition in crop sowing. But domestic production is not picking up. (See graph). There is a gap of 125 lakh tonnes.
Ramagundam, with 12.7 lakh tonne per annum capacity of urea, was to start production by 2018 as promised by the Prime Minister but has missed many deadlines, including June 2021. Other units, such as Sindri, Talcher, Gorakhpur, Barauni, are all sluggish in revival, indicating the commitment of the GoI on ‘Atmanirbhartha’.
The requirement of DAP for 2022-23 would be around 140 lakh tonnes. We imported 48.82 lakh tonnes of DAP in 2020-21 (total requirement: 110 lakh tonnes). The demand for kharif 2022 would be more, but our domestic production hovers around 37 lakh tonnes.
Non-urea Fertilizers
The stocks of fertilizers for the kharif season are not encouraging. We have just 25 lakh tonnes of DAP, 5 lakh tonnes of MOP and 10 lakh tonnes of NPK. There is not much problem with urea since it is regulated and its MRP is strictly monitored and implemented. But when it comes to non-urea fertilizers, the GoI says they are decontrolled. The point is the government is only paying importers and manufacturers of these fertilizers a fixed subsidy per tonne based on nutrient content. But in reality, it is not ‘decontrolled’, it is ‘more controlled’ since importers or manufacturers are not allowed to fix MRP for ‘decontrolled’ fertilizers of DAP, MOP, NPK, etc.
For example, the retail price of DAP is around Rs 27,000 and if you add Rs 33,000 as subsidy, it comes to Rs 60,000 per tonne. Similarly, it comes to Rs 40,000 for MOP and Rs 43,000 for NPKS. The problem is that the international prices, due to the conflict, are much more – $1,250 per tonne (Rs 95,000) for DAP; $700-750 per tonne (Rs 53,000-57,000) for MOP; $780-800 per tonne (Rs 59,000) for NPKS. And if you add 5% Customs duty and 5% other charges like bagging, rail/road freight and storage, the cost goes up 40%. Why will anyone import by incurring losses?
Secondly, the GoI has not entered into any fresh contracts; all contracts were till December 2021. The Modi government says Russia will honour the contract. The Secretary, Fertilizers, says Russia has promised additional supplies of DAP, MOP and NPK. But, so far, no payment mechanism has been evolved. Can we believe this?
Thirdly, the US has imposed sanctions. We could get crude from Russia despite sanctions because we have taken shelter under NATO and other European countries. But, when it comes to fertilizers, the case is not the same.
Fourthly, Secretary, Fertilizers, says Indian PSUs and other companies have secured supply of DAP and NPK from Saudi Arabia and Iran. He informs that India would get 30,000 tonnes of DAP from Saudi Arabia every month. We need 29 lakh tonnes of DAP and at 30,000 tonnes per month, how many months will the Modi government take to supply for the kharif season that is starting in a couple of months?
Fifthly, DAP from Morocco is disrupted since the supply of ammonia to it from Russia is disrupted. Sixthly, there is no concrete agreement with Iran. So, ultimately, the farmer would be in the doldrums. S/he would not have any other option but to take extreme steps, which are not in the interest of the country.
Way Forward
The way out is that fertilizer subsidy should be not based on nutrients, but on the actual existing international prices for the kharif season. Only then companies will come forward to import fertilizers.
In the union Budget for 2022-23, the FM has allocated Rs 1.09 lakh crore for fertilizer subsidy. It is much lower than last year’s Rs 1.62 lakh crore allocation. This has to be increased to at least Rs 2 lakh crore in view of the exponential increase in the cost of fertilizers in international markets.
The GoI may consider suspending the nutrient-based subsidy regime for the kharif season. It should promote use of single super phosphate and complexes by farmers.
The GoI has to take a holistic view of gas price to fertilizer companies, the international prices of which have gone up substantially, and is the major component (almost 70% of the cost) in the manufacture of urea.
There should be a coordinated mechanism between Ministries of Chemicals and Fertilizers, External Affairs, Finance and Commerce and Industry to facilitate and remove hurdles in the import of fertilizers. #KhabarLive #hydnews
