Industry is sure that farmers will be willing to buy more P & K at higher prices. These were in short supply under the price ceiling regime. Imports and production were held down. The question is, will fertiliser consumption rise to improve the balanced use of N (urea) and P and K, which is essential to improve crop output? This seems unlikely, if prices rise to match industry's expectations. To what end the additional subsidy? True, without it, the shortfall from the optimum balance would be more. The enhanced subsidy mitigates the rise in farmers' costs somewhat, and fattens industry's profits.

This makes it necessary to look beyond industry's avarice. The focus needs to be on the pattern of prices, in particular on the low price of urea which is heavily subsidised. Farmers have nearly doubled the use of urea and held the consumption of P & K close to the level of 1991-92. Since urea remains cheap and phosphatic and potassic fertilisers are getting dearer, little change is likely in the composition of nutrient use which was 10 N,2.9 P and 1 K in 1996-97. The villain of the piece is the heavy subsidy which is accelerating urea-use. This was recognised by the Finance Minister. But after proposing a small reduction in urea subsidy (that is, a small rise in the price of urea), he chickened out.

It would have been a different story if the additional subsidy on P & K had come from a reduction in the urea subsidy by Rs 1400 crore. That would have slowed urea consumption growth. The fertiliser policy promotes excessive use of urea. It is unable to boost the use of P & K to achieve the balanced use of NPK. The budgetary subsidy for fertilisers balloons, strains the fisc, but serves no socio-economic objective.