The Fertiliser Association of India (FAI) – a non-profit, non-trading company mainly representing fertiliser manufacturers, distributors, importers, equipment manufacturers, research institutes and suppliers of inputs – has yet again thrown a light on need of Cost Effective Fertilisation leading to Higher Agriculture Productivity.

According to FAI, it became evident during the middle of the 20th century that it would not be possible to produce enough food to meet the need of growing population by following traditional agriculture practices. The soil contains a variety of plant nutrients for growth of plants and in turn gives a particular yield of food grains and other food products. But the soil was gradually depleting in nutrients present in form of various minerals and organic matter. While there was need for increasing the yield of food grains, it was bound to fall due to lack of sufficient plant nutrients in the soil. This is simple law of conservation. One cannot produce or generate something out of nothing. It was at this time the application of nutrients from outside was thought of. These nutrients are also available in earth crust but not distributed evenly across the globe. These minerals had to be mined and processed if necessary, and then applied to the soil resulting in higher yield per hectare of land.

Balanced fertilization is important for overall growth of the economy. The plant nutrients available in form of various fertiliser products became expensive after the oil crisis of 1973 and it was not always possible for the farmers to apply the nutrients in adequate quantities due to adverse economics of growing food grains. Therefore, government devised policies where prices of fertilisers were used as an instrument to encourage use of fertilisers. Government regulated the prices of various fertiliser products at reasonable levels by subsidizing the difference in cost of production or imports and retail price to the farmers.  As a result fertiliser consumption increased from 2.57 million tonnes farm nutrients of N, P and K in 1974-75 to 12.73 million tonnes in 1991-92. Simultaneously Central and State Governments, Agriculture Universities and Research Institutes promoted balanced use of N, P and K through extensive extension work. The ratio of application of N, P and K was assiduously built to 5.9:2.4:1 in 1991-92 which was very close to desired ratio of 4:2:1 recommended by the experts. These efforts in encouraging fertiliser consumption and desired ratio of nutrients were reflected in food grain production which increased from 105.2 million tonnes in 1971-72 to 168.4 million tonnes in 1991-92.

Government in its anxiety to reduce fertiliser subsidy decontrolled fertilisers containing P&K nutrients selectively following the recommendations of the Joint Parliamentary Committee in 1992. This resulted in sudden doubling of prices of decontrolled fertilisers and dislocated the market. The consumption of decontrolled fertilisers nosedived in 1992-93 and NPK use ratio was distorted to 9.5:3.2:1 in favour of nitrogen. Government realizing the folly of selective decontrol restored the subsidy in form of adhoc concession on P&K fertilisers. Streamlining the administration of the new concession scheme took several years. It took long time to restore the N:P:K ratio again to more balanced 4.3:2.0:1 in 2009-10.

Government of India introduced Nutrient based Subsidy (NBS) Scheme w.e.f. 1.4.2010 with primary objective of balanced fertilisation including application of micronutrients. Other objectives of the Scheme were to keep subsidy bill of the government at manageable levels and also free the industry from stifling controls which had rendered the fertiliser sector un-attractive to investors. The Scheme has the provision to announce the fixed subsidy per unit nutrient of N, P, K, Sulphur and micronutrients for the entire year and giving the freedom to the industry to fix retail prices. However, government again in its wisdom implemented the scheme selectively for P&K fertilisers. Urea accounting for more than 50% of fertiliser application was left out of the Scheme.

This selective implementation of pricing policy created a serious distortion in the relative prices of P&K fertilisers vis-a-vis urea. There has been cost push for P&K fertilisers in last three years due to high prices of imported inputs and products and depreciation of Indian rupee vis-à-vis major currencies of the world. Simultaneously fixed subsidy on these fertilisers has been reduced year after year resulting in high retail prices. At the same time price of urea is being kept suppressed at a low level. In fact retail price of urea has been increased by only 11% during last 10 years whereas whole sale price index has gone up by 70% during this period. At present there is subsidy of 70% of cost of production of urea. For P&K fertilisers it is only about 35% making fertilisers containing P&K much more expensive to the farmers.

Speaking about the issue, Mr Satish Chander, Director General, The Fertiliser Association of India said: “For balanced application of various nutrients, there is need for correction in retail prices of various fertiliser products. The pricing policy can stimulate such correction by fixing appropriate subsidies on three primary nutrients N, P & K. This is obvious that there is need for higher support for P&K fertilisers and lower support for urea from the present levels of subsidy to bring out the desired corrections in retail prices of fertiliser products. Subsidy on a particular nutrient needs to be same across all products. Within the policy framework, government can manage its subsidy bill at desired level and farmers continue to get benefit of subsidy on this vital input. But the redistribution of subsidy amongst fertiliser products will encourage balanced fertilisation in the interest of health of Indian soil, agriculture productivity, welfare of farmers and food security of the country.”

Source: Sachin Murdeshwar