India's fertiliser subsidies to increase to record Rs 15 lakh crore in 2021/22

India plans to increase 2021/22 fertiliser subsidies to a record of more than Rs 15.5 lakh crore to avoid shortages amid a sharp increase in global prices of the chemicals, sources familiar with the matter said.

The figure is almost double the amount budgeted for fertiliser subsidies in the budget for this fiscal year ending on March 31.

India, the top importer of urea, is a major buyer of diammonium phosphate (DAP) needed to feed its huge agriculture sector which employs about 60 per cent of the country's workforce and accounts for 15 per cent of $2.7 trillion economy.

The government provides financial support to companies such as National Fertilizer Ltd, Madras Fertiliser Ltd , Rashtriya Chemical & Fertilisers Ltd, Chamabal Fertilsers & Chemicals Ltd that sell fertilisers at below-market rates.

Global fertiliser prices have surged roughly 200 per cent over the past year after record rises in the price of the two main energy sources – coal and natural gas – used to produce the crop nutrients and new export restrictions on fertilizers by China and Russia.

In this fiscal year, New Delhi has already raised fertiliser subsidies twice pushing up the Rs 83,548 crore budgeted support by Rs 43,430 crore.

"This year is going to be one of the highest subsidy payout because prices in international markets have gone up due to various reasons including restriction by China on DAP exports," said one of the officials.

Data imports delayed

India imports an average 60 per cent of the 10-12 million tonnes of its annual DAP consumption. "Of this 40 per cent comes from China," a second source said.

He said some DAP parcels from China have been delayed due to exports restriction. To avoid shortages, the government has also decided to further enhance compensation to the firms importing DAP after restriction by China.

"We have asked some of the NPK (nitrogen, phosphate and potassium) manufacturers to switch to production of DAP," this source said, adding the fertiliser ministry has augmented supplies to the districts with low stocks on a priority basis.

"Earlier we were using 15 trains for supplies of fertiliser in the country but since October we have doubled the number of trains for supplies," this source said.

However, farmers in India have complained about difficulties in getting DPA. Demand for fertiliser rises during October and November, a peak season for plantation of winter sown crops like wheat.

"We had difficulty in buying DAP this time and prices are also high," said Ravindra Kajal, a wheat grower from Haryana.

The finance ministry did not respond to Reuters email seeking comment and the fertiliser ministry spokesperson did not respond to calls.

For years, India has capped the price of urea at Rs 5,360 per tonne excluding taxes, while in the global markets prices have surged to around Rs 74,357/tonne, a third source said. India imports about 30 per cent of about 35 million tonnes of average annual consumption of urea.

According to the government data, urea prices surged by an annual 144 per cent in October to Rs 51,824/tonne, while DAP prices rose by 84.3 per cent on delivered basis to Rs 51,224/tonne.

India does not control prices of DAP but raises the subsidy to keep an indirect check on retail prices. Retail prices of a tonne of DAP in India hover around Rs 25,000, whereas global prices have surged to about Rs 56,331, the third source said.

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