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Deregulating Non-Subsidised Fertilisers
Context:
With price decontrol of urea, di-ammonium phosphate (DAP), and other politically sensitive nutrients unfeasible, the focus may shift to expanding the market for non-subsidised fertilisers by easing registration requirements.
More on News:
- Centre to allow companies to freely set prices of DAP, muriate of potash (MOP), and other non-urea fertilisers.
- This includes complexes containing varying proportions of nitrogen (N), phosphorus (P), potassium (K), and sulphur (S) that are covered under the Nutrient-Based Subsidy (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.
- The Department of Fertilisers prescribed maximum profit margins over cost to determine the “reasonableness” of their MRPs.
- Prices of imported urea, DAP, and MOP dropped to around $350, $560, and $319 per tonne, respectively, from recent highs of $900-1,000, $950-960, and $590.
Non-subsidized fertilisers:
- They are sold at market prices without government financial assistance.
- Farmers pay the full market rate, which varies based on market conditions, including supply, demand, and international pricing trends.
- Deregulating non-subsidized fertilisers means eliminating government controls or regulations on pricing, distribution, or sale of fertilisers that do not receive subsidies.
Benefits of Deregulation:
- Deregulating non-subsidised fertilisers can allow for faster introduction of new and innovative nutrient products into the Indian market.
- In India, registering new fertiliser products takes an average of 804 days, compared to 90 days in the US and 270 days in China, as per World Bank’s ‘Enabling the Business of Agriculture 2019’ report.
- Deregulation can significantly reduce this time.
- Deregulation can follow the framework of water-soluble fertilisers (WSFs) only requiring basic quality & labelling standards bypassing lengthy agronomic trials. WSFs have a higher nutrient use efficiency of 60-70% compared to 30-35% for regular fertilisers, leading to better crop yields. Plants absorb more nutrients when delivered through WSFs than normal bulk field-applied fertilisers.
- Deregulation of non-subsidized fertilisers can be a first step before potentially deregulating subsidised fertilisers like urea in future.
Drawbacks of Deregulation:
- There is no fiscal pressure on the government to raise prices of subsidised fertilisers like urea, DAP and MOP. The Government of India budgeted ₹163,999.80 crore for fertiliser subsidies in 2024-25. This burden is decreasing due to falling global fertiliser prices.
- The government has informally fixed “reasonable” MRPs for decontrolled NBS fertilisers, limiting the pricing freedom of companies.
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World Bank’s ‘Enabling the Business of Agriculture (EBA) 2019’ report
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