Explained: Argument for deregulating non-subsidised fertilisers

Nor is the Centre likely to allow companies to freely set the MRPs of di-ammonium phosphate (DAP), muriate of potash (MOP), and other non-urea fertilisers — including complexes that contain varying proportions of nitrogen (N), phosphorous (P), potassium (K) and sulphur (S) — covered under the NBS.

NBS fertilisers are technically decontrolled: manufacturers or importers only receive a per-tonne subsidy linked to their individual N, P, K, and S content. In the past two years, however, even these fertilisers have been brought under informal price control. Effective from April 2023, the department of fertilisers has prescribed maximum profit margins over cost to determine the “reasonableness” of their MRPs. Companies charging more wouldn’t be paid any subsidy by the Centre under NBS.

The informally-fixed “reasonable” MRPs are now Rs 27,000 per tonne for DAP, Rs 30,000-31,000 for MOP, and Rs 11,000 for single super phosphate (SSP). They are Rs 24,000 for 20:20:0:13, and Rs 29,400 for the 10:26:26:0 and 12:32:16:0 NPKS complex fertilisers.

Deregulating non-subsidised fertilisers

The table shows the all-India sales of fertiliser products on which the Centre extends subsidy, whether with controlled MRP (urea) or “decontrolled” pricing under NBS.

There are some 29 subsidised fertilisers at present, but almost 94% of overall sales in 2022-23 and 2023-24 (April-March) comprised just seven products: Urea, DAP, SSP, 20:20:0:13, MOP, 10:26:26:0 and 12:32:16:0.

The new political situation apart, there isn’t much fiscal pressure either on the government to directly raise or permit hikes in the MRPs of these fertilisers. The Centre’s fertiliser subsidy outgo for 2024-25 is budgeted at Rs 163,999.80 crore, down from Rs 189,487.44 crore in 2023-24, and Rs 251,339.36 crore in 2022-23.

Landed prices of imported urea, DAP and MOP, too, have dropped to around $350, $560 and $319 per tonne respectively, from their corresponding recent highs of $900-1,000 (in November-January 2021-22), $950-960 (July 2022) and $590 (till March 2023). Even prices of key inputs, phosphoric acid and ammonia, have fallen to $950 and $400 per tonne respectively, from their peaks of $1,715 (July-September 2022) and $1,575 (April 2022) scaled post Russia’s invasion of Ukraine.

What are the reforms realistically possible in this scenario? A low-hanging fruit could be deregulating all fertilisers that aren’t covered under any subsidy.

Registering a new fertiliser product takes an average of 804 days in India, according to the World Bank’s ‘Enabling the Business of Agriculture 2019’ report. This is against 570 days in Russia, 528 in Brazil, 356 in Pakistan, 270 in China, 225 in Canada, 210 in Argentina, 100 in Thailand, 90 in the US, 30 in Japan, and zero in the European Union countries.

The sheer time taken — from the filing of application and field-testing at multiple locations for one or more cropping seasons, to the final notification under the Fertiliser Control Order as suitable for use by farmers and state-level approvals — hinders the introduction of new nutrient products into the country.

“The government should grant automatic registration for any new product meeting two requirements — a minimum content of total plant nutrients, and a maximum limit of heavy metals and other contaminants. This, along with mandatory label claims [open for testing by enforcement agencies], is what most advanced countries follow. They do not have agronomic or bio-efficacy trial requirements,” Sanjiv Kanwar, managing director, Yara Fertilisers India Pvt. Ltd, said.

Precedent in water-soluble fertilisers

This procedure of automatic registration, subject to the product confirming to basic quality parameters and truthful labeling, is already being implemented in water-soluble fertilisers (WSF).

The Narendra Modi government, in October 2015, issued “general specifications” for the commercialisation of these fertilisers that, being 100% soluble in water, can be applied to crops through drip irrigation or spraying directly to the plant leaves, instead of normal field application in the soil.

The specifications required WSFs to have a minimum 30% content of total nutrients — 25% primary (NPK), and the balance secondary (S, calcium, magnesium) and micro (zinc, boron, manganese, iron, copper, molybdenum) — and maximum prescribed limits for contaminants (lead, cadmium, arsenic, total chloride and sodium). Companies can market any WSF meeting these specifications (with legible labeling on bags/containers) after 30 days of intimating the relevant government authorities about “the details of the product and their intention to sell”.

“The WSF model can be extended to all fertilisers on which the government pays no subsidy. Our farmers would, then, get access to the latest innovative products that their peers in Europe or US can, without such long waits,” Kanwar, whose company is the Indian subsidiary of the $15.5-billion Norwegian crop nutrition major Yara International, said.

Since the October 24, 2015 order was issued, over 100 WSF products have been launched by the likes of Deepak Fertilisers and Petrochemicals Corporation, Coromandel International, Yara, ICL (formerly Israel Chemicals Ltd), Zuari FarmHub, and Indian Farmers Fertiliser Cooperative.

Yara alone is marketing 7 WSF products with different NP/NPK combinations under the YaraRega and YaraTera Deltaspray brands. These are targeted at high-value crops such as grapes, pomegranate, papaya, ginger, turmeric, capsicum, tomato, onion, cucumber, gourds, cotton and sugarcane, while applied through drip irrigation systems (fertigation) and for meeting the nutrient requirements specific to each growth stage.

High-value nutrients

“The absorption of nutrients by plants is higher when delivered through WSFs than the normal bulk field-applied fertilisers,” N Suresh Krishnan, chairman of the Fertiliser Association of India, told The Indian Express.

Normal complex fertilisers are obtained through chemical reactions of ammonia (for N), phosphoric acid (P) and MOP (K). In WSFs, the ingredient sources are sulphate of potash or potassium nitrate (for K) and mono-ammonium phosphate (N and P). These are fully water-soluble but also more expensive.

Not surprisingly, the MRP of regular 19:19:19 NPK fertiliser is about Rs 31,000/tonne, whereas the same for WSF 19:19:19 is Rs 125,000. The uptake of available nutrients by crops is, however, only 30-35% from field-applied fertilisers, compared to 60-70% from WSFs.

The nutrient use efficiency is even higher, at 80-90%, for liquid fertilisers such as urea ammonium nitrate. These come in dissolved solution form requiring only further dilution, unlike WSFs that farmers mostly get as crystals in 25-kg bags, and have to mix with water in fertigation tanks.

There is a proposal currently to deregulate liquid fertilisers on the lines of WSFs, with a minimum content of 15% total primary nutrients and the same heavy metal contaminants limit.

The industry is clearly pitching for deregulation of non-subsidised fertilisers as the first step before decontrol of urea and NBS fertilisers — whenever that becomes politically feasible.