First urea, now DAP: High use of subsidised fertilisers raises crop yield fears

Data from the Department of Fertilisers shows a 3.7 per cent increase in the sale of urea during April-October 2022 over the corresponding seven months of the previous year. Even higher, at 16.9 per cent, has been the growth in DAP sales.

On the other hand, sales of all other fertilisers have tanked. These include muriate of potash (MOP), single super phosphate (SSP) and complex fertilisers containing nitrogen (N), phosphorus (P), potassium (K) and sulphur (S) in different proportions. The sale of MOP has plunged 47.9 per cent, and of NPKS complexes and SSP by 19.9 per cent and 9 per cent, respectively (see table).

The high subsidy on urea and DAP makes them much cheaper for farmers relative to other fertilisers. The maximum retail price (MRP) of urea is currently fixed at Rs 5,628 per tonne. Companies are obliged to sell at this administered price, with their higher cost of production or imports being reimbursed as subsidy by the Centre.

The other fertilisers are technically “decontrolled” since April 2010, with the Centre only paying a fixed per-tonne subsidy to ensure “reasonable levels” of prices. But the government has, in recent times, and especially with the global price surge post the Russia-Ukraine war, practically brought back even these fertilisers under the control regime.

This reflects in their pricing. Companies do not sell DAP at more than Rs 27,000 per tonne, and the MRPs are similarly set at Rs 34,000 per tonne for MOP, Rs 29,000-31,000 per tonne for NPKS complexes and Rs 11,000-11,500 per tonne for SSP. In the event of charging more, companies run the risk of their subsidy payments being denied, withheld or delayed.

The informally fixed prices, however, have created their own distortions. Urea and DAP are high-analysis fertilisers, containing more than 30 per cent of any single nutrient. Urea has 46 per cent N, while DAP has 46 per cent and also 18 per cent N. While urea is retailing at a fourth of the price of packed common salt, DAP has also become far cheaper than popular NPKS complexes such as 10:26:26:0, 12:32:16:0 and 20:20:0:13 that contain less P or even N. SSP, which has just 16 per cent P and 11 per cent, normally sells at one-third the MRP of DAP. That gap has now reduced to under half.

It’s even worse with MOP, which contains 60 per cent K. So high is its present MRP that farmers have no incentive today to apply. Nor is it viable for companies to use MOP as a source of K in complexes. “The subsidy on DAP is Rs 48,433 per tonne, as against Rs 14,188 for MOP, Rs 33,353 for 10:26:26:0 and Rs 7,513 for SSP. Why will farmers opt for any fertiliser other than DAP and, of course, urea?” asked an industry representative.

K.S. Raju, Chairman, Fertiliser Association of India, said: “The ideal NPK use ratio for the country is 4:2:1, whereas it was 6.5:2.8:1 in 2020-21 and 7.7:3.1:1 in 2021-22. In the recent 2022 kharif season, the ratio got further distorted to 12.8:5.1:1.”