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The losses caused to the farming community as a result of the recent spate of natural calamities in different parts of the country appear to have aroused the government's sympathy. It has responded in good measure by a volte face on the issue of DAP price decontrol just about a week before the start of the rabi season. The logic behind this decision seems to be that price control will keep the retail prices for the nutrient at affordable levels. As a result, a large majority of the farmers in the country, who would have cut down on the use of the nutrient owing to higher prices, will either maintain or increase their consumption levels. Thus, the move will not only help the centre win the farmers' favour, it will also go a long way in maintaining soil fertility.
But the government's plan to improve DAP consumption in this manner may not yield the desired results. In fact, the price control is likely to lead to a situation of short supply and a rise in black marketing. This is because in the absence of a concrete subsidy policy on the nutrient, DAP manufacturers will cut production and importers will cancel their import contracts. The kharif season has already witnessed such a situation. Most DAP manufacturers and importers are facing negative contributions owing to a rise in import costs and they had decided to curtail their supplies to the market rather than sell at a loss. The only way out of the situation is to increase the quantum of price support to DAP suppliers to compensate them fully for the rise in costs. But considering that the governemnt's subsidy bill has burgeoned from the budgeted Rs 9,983 crore to Rs 12,583 crore, it will be a tough decision to make.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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