Price distortions in fertilisers will not help farming in the long run govt can offer acreage based cash transfers

Price distortions in fertilisers will not help farming in the long run govt can offer acreage based cash transfers

The government can maintain a stock of basic fertilisers, including urea and DAP, to ensure no untoward price rise even in a decontrol scenario.

Two ambitious schemes of the Narendra Modi government — Soil Health Card and mandatory neem-coating of urea — were supposed to promote balanced use of fertilisers. However, far from weaning farmers from urea, annual consumption of this nitrogenous fertiliser has only risen from 30 to 35 million tonnes (mt) in the last five years. This year, not only have urea sales gone up by 3.7 per cent during April-October over the same period of 2021, it has grown even more, at 16.9 per cent, for di-ammonium phosphate (DAP). This has come even as sales of all other fertilisers — including complexes containing nitrogen (N), phosphorus (P), K (potash) and sulphur (S) in different proportions – have fallen. In other words, instead of balanced use of plant nutrients based on soil testing and specific crop requirement, Indian farmers are effectively applying just urea and DAP — both high-analysis fertilisers containing 46 per cent N and P respectively.

They have reason to do so: The government has fixed the maximum retail price (MRP) of urea at Rs 5,628 per tonne. The MRPs of other fertilisers are technically decontrolled, but companies have been “told” not to charge more than Rs 27,000/tonne for DAP. The informally-fixed MRPs are higher at Rs 29,000-31,000 and Rs 34,000 per tonne for NPKS complexes and muriate of potash (MOP) respectively, but farmers have little incentive to buy at these prices. Why should they apply complexes such as 10:26:26:0, 12:32:16:0 and 20:20:0:13 when DAP is cheaper and has 46 per cent P as well as 18 per cent N? The fact that DAP does not contain K, S or other macro and micro nutrients wouldn’t matter to a majority of farmers. For them, choice of fertilisers is primarily a function of prices. Underpricing of urea (a historical phenomenon) and DAP (recent) is a product of subsidy-induced market distortions, for which the blame lies squarely with the Modi government. The compulsions of electoral politics have clearly trumped concerns over soil nutrient imbalances.

The effects of these – the current NPK ratio is about 13:5:1, as against the ideal 4:2:1 – would ultimately show up in crop yields. Plants, like humans, will respond poorly to fertilisers if only one or two nutrients are given in excess. The Modi government should replace subsidies on individual fertiliser products with a flat per-hectare cash transfer, maybe twice a year. Every farmer can have an e-wallet account into which this money can be credited before the kharif and rabi planting seasons. The e-wallet may be used only for the purchase of fertilisers. The government can maintain a stock of basic fertilisers, including urea and DAP, to ensure no untoward price rise even in a decontrol scenario.