The fertiliser policy is getting tied up in knots. The centre has freed phosphatic (P) and potassic (K) fertilisers from price ceilings. It has done this in the certain knowledge that P & K prices will become dear. So it has sought to keep rates affordable for farmers by increasing the budgetary subsidy for these fertilisers from an estimated Rs 2,600 crore in 1978-98 to Rs 4,000 crore this year, a whopping close to 54 per cent rise.It is, therefore, reasonable to assume that the government took some assurance from the industry regarding the order of price increases it would resort to. But judging by industry expectations that prices will rise by Rs 1,000-2,000 per tonne of di-ammonium phosphate, for example, there is no quid pro quo. This translates into a 10 per cent to 20 per cent price increase. The enhanced subsidy seems to support the stiff increase.
The 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 urea (N) and P and K, which is essential to improve crop output?
This seems unlikely, if prices rise to match industry 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 profits.
This makes it necessary to look beyond the industry's avarice. The focus needs to be on the price-pattern, 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 1991-92 level. 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 1,400 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.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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