The government on Thursday hiked subsidy on two important fertilisers Di-Ammonium Phosphate (DAP) and Muriate of Potash (MoP) to prevent a rise in their domestic prices following a surge in global rates.
The additional burden of subsidy is estimated to be about Rs 10,000 crore for the current financial year after the government raised the benchmark price level for fixing subsidy for these nutrients.
“The Cabinet today accorded approval for the proposals for revision in the benchmark prices for nutrient-based subsidy (NBS) for 2011-12 for phosphatic and potassic fertilisers,” an official statement said.According to a senior official in the fertiliser ministry, the benchmark price for DAP has been increased to USD 612/tonne from the current level of USD 580/tonne and that of MoP to USD 420/tonne from USD 390/tonne, taking into account the prevailing global prices.
The move has been necessitated to insulate fertiliser firms from high global prices and maintain domestic prices at affordable rates to farmers, the official added.
Asked about impact on retail price to farmers, he said, “There won’t be any change in MRP of DAP and MoP. The government is bearing extra subsidy for costlier imports”.
India imports six million tonnes of DAP and four million tonnes of MoP every year.
Fertiliser Association of India Director General Satish Chander said, “There will not be any rise in MRP. At best,the rise, if at all, would be minimal.”
The Cabinet, however, gave freedom for fertiliser companies to increase the MRP of DAP by up to Rs 600 per tonnne from existing Rs 10,750 per tonnes to recover its incidental cost if any, the official said.
The budgetary provision for phosphatic and potassic fertilisers for the 2011-12 fiscal is Rs 33,500 crore, it said.
“This (revision in benchmark prices) will enable the manufacturers and importers to import fertiliser and fertiliser inputs and undertake domestic production and make fertiliser available to the farmers in 2011-12,” an official statement said.
The farmers would be able to buy fertilisers at subsidised rates at the maximum retail price (MRP), it added.
From 2010-11 fiscal, the government is fixing subsidy on nutrients like N (nitrogen), P (phosphorus) and K (potassium), which is linked to the import parity price of Urea, DAP and MOP.
Subsidy is reimbursed to fertiliser firms for selling the indegenious or imported fertilisers at lower price to farmers.