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Wednesday, October 28, 2020

Tinkering at margins

Cap on subsidised fertiliser merely addresses issue of its diversion, doesn’t fix real problem — overuse by farmers.

By: Editorial | Updated: October 19, 2020 1:55:17 am
The Narendra Modi government must shoulder much of the blame for this agronomic and environmental disaster.

It’s over a decade since a so-called nutrient-based subsidy (NBS) regime for fertilisers was instituted. By linking subsidy to nutrient composition rather than products per se, NBS was expected to wean away farmers from applying too much urea containing only nitrogen. But the actual results prove otherwise. Between 2009-10 and 2019-20, urea consumption rose from 26.7 million tonnes (mt) to 33.7 mt. While overall fertiliser consumption increased from 53.4 mt to 61.7 mt, urea’s share went up from below half to 54.6 per cent during this period. The reason for the worsening fertiliser imbalance is simple: Since April 2010, the maximum retail price (MRP) of urea has been raised by hardly 11 per cent, from Rs 4,830 to Rs 5,360 per tonne. The MRPs of other fertilisers — which were decontrolled, with the government only giving a per-tonne subsidy based on their nutrient content — have gone up from 2.5 to four times during these 10 years. Since NBS has been implemented only in other fertilisers, even as urea remains under price control, farmers are using more, not less, of the latter.

The Narendra Modi government must shoulder much of the blame for this agronomic and environmental disaster. The basic MRP of urea hasn’t been revised at all in its nearly six-and-a-half years. Instead of bringing urea under NBS — which would push up its MRP closer to Rs 10,000 per tonne at the current per-kg subsidy for nitrogen present in other fertilisers — the Modi government has resorted to tinkering at the margins. That includes compulsory neem-coating of all urea (from December 2015) and making fertiliser subsidy payment to companies conditional upon actual sales to farmers being registered on point-of-sale machines with retailers after biometric authentication (from March 2018). There’s a plan next, as reported by this newspaper, to cap the total number of subsidised fertiliser bags that any person can purchase during an entire cropping season. But these measures merely address the issue of subsidised fertilisers, especially urea, getting diverted to bulk buyers/traders or even non-agricultural users such as plywood and animal feed makers. They don’t fix the real problem — of overuse by farmers themselves. If urea is heavily under-priced, they will apply three bags when two or less would suffice.

Urea has to come under NBS. A politically feasible way to do it is by hiking its MRP to Rs 10,000 — maybe over two years — and simultaneously reducing the NBS rates of phosphorus, potash and sulphur to make other fertilisers cheaper by Rs 1,500-2,000 per tonne. In the long run, NBS itself should be replaced by a flat per-acre cash subsidy that could be used to purchase any fertiliser. That includes value-added and customised products containing not just other nutrients, but delivering even nitrogen more efficiently than urea.

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