The Cabinet Committee on Economic Affairs has approved the proposal to hike subsidy rates for phosphorus and potassium-based fertilisers by 140% in a bid to provide relief to farmers as the kharif sowing season begins. The estimated additional subsidy burden is around ₹14,775 crore, with the Centre emphasising that this is a one-time measure as part of COVID-19 relief.
Unlike urea, where the Centre sets a fixed maximum retail price, non-urea fertiliser prices are decontrolled, with the Centre fixing nutrient-based subsidy rates each year instead. So far, a 50 kg bag of di-ammonium phosphate (DAP), the fertiliser most popular with Indian farmers after urea, was sold at ₹1,200, including a subsidy of about ₹500.
However, the bull run in the global commodity markets has seen a surge in prices of the imported raw materials as well as the finished fertiliser. In early April, a number of Indian fertiliser companies hiked their DAP prices to ₹1,900 per bag. Farmers’ groups protested the ₹700/bag hike, pointing out that along with the rise in diesel and petrol prices, their input costs for the kharif season would spiral out of control in the midst of a pandemic.
After a high-level meeting on May 19, Prime Minister Narendra Modi announced that the subsidy would be increased to ₹1,200 per bag, ensuring that farmers would not face any price rise. That decision was approved by the Cabinet on Wednesday, applicable for the kharif season only.
“This has been done as one-time measure as COVID-19 package to reduce the hardships of farmers. As anticipated that international prices may come down in few months, GoI may review the situation accordingly and decide regarding subsidy rates at that point of time,” said an official statement.
The Centre has also directed all fertilizer companies to sell all their old stocks of DAP at the old prices only.