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From Plate to Plough: For farmers, the next big idea

PM has asked them to halve urea consumption by 2022. But this cannot be achieved till the price of the fertiliser remains artificially low.

Written by Ashok Gulati , Ranjana Roy |
December 18, 2017 1:32:04 am
There is talk of direct benefit transfer (DBT) of subsidies and the Modi government seems to have agreed on the idea in principle. (AP Photo)

In his ‘Mann ki Baat’ on November 26, Prime Minister Narendra Modi asked farmers to cut urea consumption by half by 2022. He cited an example of farmers in Tohu village in Himachal Pradesh’s Hamirpur district who have increased wheat productivity by three times, reduced urea consumption significantly through the use of soil health cards (SHCs) and increased their income by Rs 5,000 to 6,000 per acre. This is indeed an outstanding achievement. The question, however, is whether the feat of Tohu’s farmers can be scaled up at the all-India level by 2022, as the PM has desired? And if so, how?

This call by the PM took the fertiliser industry by surprise. The industry had its flagship annual event on December 5 and 6 in Delhi, where thousands of global and Indian fertiliser industry stakeholders had gathered to exchange ideas, talk about innovations and draw up investment plans. India is an important market, consuming about 30 million tonnes (MT) of urea annually, of which about 24.5 MT is domestically produced and the rest is imported. Most of the industry players had been projecting increasing consumption of urea in India, given that higher incomes have increased the demand for food in the country. In such a situation, the PM’s call for halving urea consumption by 2022 was somewhat puzzling to the fertiliser industry, more so when the government itself is trying to increase urea production. The government has plans to revive four dormant urea plants in Gorakhpur (Uttar Pradesh), Barauni (Bihar), Talcher (Odisha) and Ramagundam (Telangana).

However, it is also true that in the last five years, urea consumption on a per hectare basis, has stagnated in India and the overall per hectare consumption of nitrogen (N), phosphorous (P) and pottasium (K) has declined somewhat (see graph). But is this due to dramatic changes in pricing of DAP (diammonium phosphate) and MOP (muriate of potash) as result of the Nutrient Based Subsidy (NBS) scheme? Can we ascribe the fall in consumption to government policies such as those pertaining to SHC or Neem Coated Urea (NCU)? Or does the decline have anything to do with the falling profitability of several crops in the past four years? Perhaps a mix of these factors has led to a stagnation in urea consumption.

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It is well-known that urea prices in India are among the lowest in the world (hovering around $ 86 per tonne). Urea prices in neighbouring countries in South and Southeast Asia, including China, are at least two to three-times higher. Also, the price ratio of urea to DAP and MOP is highly skewed. No wonder, Indian farmers are using higher doses of urea (nitrogen) compared to phosphate (DAP) and potash (MOP), and not getting the best results in terms of yields. Also Indian soils are deficient in micronutrients, especially zinc (about 48 per cent) — a fallout of which is zinc deficiency in wheat and rice, which, in turn, contributes to stunting in children. The imbalanced use of N, P and K, therefore, needs urgent correction. Extremely low prices of urea also lead to its diversion to non-agricultural uses — as well as smuggling to neighbouring countries — that needs to be checked.

Given these realities, serious thought needs to be given to the PM’s call to slash urea consumption. The PM’s call is as important as his call on February 28, 2016 to double farmers’ incomes by 2022. The latter led to the formation of a government committee that has prepared 14-volume report. One should not be surprised if a similar effort goes in preparing a report to halve urea consumption by 2022.

However, there are already at least two programmes, SHC and NCU, to reduce urea consumption, at least in the short-run. NCU, in fact, has been in place since 2008, when only 20 per cent urea was permitted to be neem coated. This was raised to 35 per cent in 2010, and to 100 per cent in 2015. The underlying assumption is that NCU can improve nitrogen use efficiency (NUE) by about 10 per cent by slowing the release of nitrogen. The SHCs, which have now crossed the 100 million mark, can also help rationalise the use of urea, provided they are backed by a massive extension programme.

But the biggest policy instrument, pricing of urea, remains highly distorted. So long as this policy is in place, it will be difficult to achieve any significant reduction in urea consumption, the SHCs and NCU notwithstanding. The record of political parties over the past 15 years or so does not give us hope that the pricing will be corrected to reflect the true cost of production. There is talk of direct benefit transfer (DBT) of subsidies, though, and the Modi government seems to have agreed on the idea in principle. If the government decides to shift the money equivalent of the current fertiliser subsidy bill of Rs 70,000 crore plus directly to farmers’ accounts, and lets the prices of fertilisers be decided by the full play of demand and supply forces, it can immediately stop all diversion to non-agri-uses as well as to other countries. The move will also give the right signals to farmers to use N, P and K in appropriate ratios. It will also excite industry to innovate and bring new products — a win-win situation for all. If the Modi government can move quickly in that direction, there is hope to cut urea consumption significantly, at least for some time.

Gulati is Infosys Chair professor for Agriculture and Roy is a Research Associate at ICRIER.

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