Fertilizer subsidy likely to touch ₹2.25-lakh crore in FY24

The government said on Wednesday that the total subsidy on fertilizers could reach INR 2.25 crore during FY24. This includes INR 1.08 crore for the Khareef season of FY24.

However, the Minister of Chemicals and Fertilizers Mansukh Mandavia ruled out revising the retail prices of fertilizers including urea. The budget allocation for fertilizer subsidy for FY24 is ₹1.75 lakh crores, while the actual expenditure during the previous financial year (2022-23) was ₹2.54 crores. Accordingly, the total support in FY24 is expected to exceed BE, but less than the actual FY23 BE. This is happening despite falling global fertilizer prices.

“Weaker global prices will have an impact on domestic prices with a lag of 5-6 months. Until now, companies have stocks of raw materials or products obtained at higher prices, which means more support is needed so that farmers do not suffer.”

Prices are going down

The price of imported urea fell to $330 per ton (FOB from China) in the latest tender, compared to an average of $361 in March and $722 in May 2022. The global price of DAP, which peaked at around $950 per ton. Last year, it is now down to $515-520. In addition, the Ministry of Planning dropped to $422 per ton from $590 in March 2023.

Moreover, Mandaviya added that neither urea nor DAP, NPK or MOP prices will be adjusted upward despite the subsidy hike. As of now, the government is offering $2,126 per bag (50 kg) of urea as a subsidy, while the maximum retail price is $276 per bag. The last revision took place over 13 years ago when the government at that time decided to increase the MRP for urea to ₹5,310 per tonne from ₹4,830 with effect from 1 April 2010.

Urea has the highest payload of all fertilizers used in the country and, unlike other categories, MRP is legally fixed by the center.

MRP is not inclusive of taxes and fees for neem paint. The difference between the fertilizer delivery cost at the farm gate and the MRP cost paid by the farmer is given as subsidy to the fertilizer manufacturer/importer by the government. In the case of fertilizers other than urea, the government pays subsidies to makers based on nutrient-based rates and companies can revise their MRP.

Mandaviya announced that a subsidy of Rs 70,000 crore will be allocated to urea during the FY24 fall season. In addition, a subsidy of ₹38,000 crore will be given to NBS to ensure availability of 25 grade phosphate and potassium (P&K) fertilizers to farmers at subsidized rates.

He further said considering the total subsidy amount of Rs 2.54 lakh crore for FY23, the government is spending €8,909 on fertilizer subsidy per hectare of arable land and €21,233 per farmer.