Friday, June 1, 2012

Subsidy CUT, Rupee DIP = Fertilizer prices UP

India uses low quantity of  fertilizers against the global average, the monsoon plays major role on consumption pattern in India, a  good rainfall makes  higher usage of fertilizers for enhancing crop yields. Due to Euro zone crisis the world  markets are volatile, Indian economy  also experienced the same negative impact. India has been depending on imports for its major soil nutrient needs and the Rupee value has gone down with new record level so the fertilizers prices are expected to raise. The components for making fertilizers like naphtha ,fuel and natural gas prices  have been increasing year by year and if the fuel price increases, invariably it is going to affect on fertilizer prices.

Indian farmers are already suffering  from high input costs and  the steep increase in fertilizer prices are going to be more burden for them. India imports a quarter of urea, 100% of potash and almost 70% of DAP (Diammonium Phosphate).  DAP  is widely used by Indian farmers, the price has gone up to Rs.987 per bag( 50 Kilos)  and it is expected to be increased more with rupee dip. similarly  Potash has increased to Rs.720 per bag( 50 Kilos). Not only the fertilizers and also the pesticides, insecticides and herbicides prices  have affected  by  rupee slide. Acetamiprid (ACE) and Imidacloprid (IMI) are widely used pesticides in India, their prices have also increased by Rs.100.

The price of fertilizers and pesticides  may increased by 30% due to rupee value decline and subsidy cuts. The government has  decreased the subsidy on DAP and other NPK (Nitrogen, Phosphorous, and Potash) fertilizers by 27% since April 2012, the subsidy for DAP was Rs 19,763 in last fiscal  year now it is  Rs 14,350 per tonne similarly the subsidy for  MOP (Muriate of Potash)  has been fixed at Rs 14,440 per tonne against Rs 16,054 last fiscal. The subsidies for nitrogen, phosphate and potash nutrients have also been lowered by 11.6%, 32.6% and 10.3% respectively. The raw materials for producing fertilizers prices have also increased due to rupee depreciation. so invariably, the kharif crops going to be very expensive for  farmers with raised input costs.

Every Farmer need subsidies since they have been incurred losses without remunerative prices, non availability of credit ,high input costs and many more adverse reasons. If the government feels the subsidy on fertilizers must be reduced  then it should allow the farmers to fix the prices for their produces on their own like other industries and also the government should not intervene in agriculture exports. The UPA government has randomly  increasing  the petrol prices to save the Oil marketing companies from their losses, why can't the government do the same thing for the farmers by fixing the  remunerative prices for farm produces. In fact, the government reduced the fertilizer subsidies as part of their austerity measure to match the fiscal deficit  but the government is claiming that the reduced subsidy funds are going to be diverted to organic manures and bio fertilizers. Actually the organic farmers are very less, organic farming is picking up  but reducing the subsidies on chemical fertilizers are ridiculous since 90% of the farmers are depend on the same.

Ministry of chemicals and fertilizers has intended  to give the subsidies directly to the farmers, it's a welcome move because the retailers are misusing the subsidies and it's not reaching to the real beneficiaries.  At this point of time the government officials should ensure the  fertilizers are sold at MRP prices and most of the retailers might have the old stocks which they got with old prices, they are trying to sell the same stock with new increased prices, the government officials must control the traders not to sell with increased prices. At least it will give little relief to farmers against the increased input costs.