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Agriculture Policies since Independence: Fertilizers

 Agriculture Policies since Independence: Fertilizers

  • The per hectare consumption of fertilizer in nutrient terms stands at 135.3 kg in 2009-10.
  • However, recent trends in agricultural productivity show a decline in marginal productivity of soil in relation to the application of fertilizers.
  • One important reason for this is the skimmed application of the three important types of fertilizers viz. Nitrogenous, Phosphatic and Potassic (NPK).
  • For India, the standard ratio for the use of NPK fertilizers has been estimated to be 4:2:1. But during 2006-07, the ratio was 6:2.4:1 after which it is improving to reach 4.3:2:1 during 2009-10 Thus the fertilizer consumption is now less biased in favour of nitrogenous fertilizers.
  • The bias in favour of nitrogenous fertilizers reached its extreme in 1996-97 when it was 10:3:1 after which it has reduced despite periodic fluctuations. Agriculture Policies since Independence: Fertilizers
  • Another reason for negative impact of fertilizer use on productivity of soil, is comparatively higher application of straight fertilizers like urea, DAP and MOP as against the complex fertilizers (NPKs) which are considered to be agronomically better and more balanced fertilizers products.
  • The domestic production of Urea and DAP has been rising after witnessing a decline till 2007-08. While Urea production has increased from 199.2 lakh tonnes in 2008-09 to 211.12 lakh tonnes in 2009-10 DAP production has increased from 29.93 tonnes to 42.46 lakh tonnes in the same period. After declining to 58.5 lakh tones in 2007-08, the production of complex fertilizers has increased to 80.38 lakh tonnes in 2009-10.
  • Availability of raw materials is the main constraint towards increase in fertilizer production.
  • There is no domestic production of MOP and its requirement is met fully by import. Urea and DAP are also imported in significant amounts.  Indian Agriculture since Independence: Fertilizers

Fertilizer Prices and Subsidy  [ Agriculture Policies since Independence: Fertilizers]

  • Fertilizer prices in India do not reflect market prices because of the Central government subsidy glir6ei both the farmers and the fertilizers manufacturers.
  • However, the fertilizer subsidy system has changed since April 2010. Till this time, the farmer got fertilizers at a predetermined lower rate called Maximum Selling price.  Indian Agriculture since Independence: Fertilizers
  • The manufacturer was paid a price called Retention Price which was high enough to cover his costs and yet leave a 12 percent post tax return on the net worth.

Three important reforms were introduced in April; 2010:

  • 1) Prices of ail fertilizers except urea were decontrolled.
  • 2) Retention Price System was replaced by Nutrient-based subsidy system. Under this system, the government pays the fertilizer companies a fixed amount of subsidy per tonne of nutrients being used and gives the companies the freedom to decide the prices of the nutrient-based fertilizers.
  • 3) The list of nutrients eligible for subsidy was expanded from just phosphatic end potassic fertilizers to include sulphur, boron and zinc.
  • These reforms are expected to solve different types of inefficiencies being faced both by the fertilizer companies and the farmers. The companies have got more flexibility in terms of deciding new combination of the nutrients which are competitive in terms of price and useful. This is likely to increase competition among these companies and thus can decrease fertilizer prices.
  • More importantly, it is expected to tackle the imbalance in the use of fertilizers and therefore crucial to maintain soil fertility.  Indian Agriculture since Independence: Fertilizers
  • There are, however, many bottlenecks. Urea prices are still regulated and therefore the reforms may not reduce unnecessary greater demand for cheap urea.
  • The reform in urea sector is on cards, but the political will is missing due to powerful urea producers’ lobby. This half-hearted reform can take the credit away from the nutrient-based subsidy system.
  • Further, farmers are willing to use fertilizers in a balanced way, but they do not have information on the nutrients already present in their soil. This may not allow them to take an informed decision on fertilizer use. Agricultural Extension, through soil testing initiatives can solve such problem.
  • The government has notified the New Investment Policy 2012 (NIP-2012) in the urea sector which will encourage investments leading to increase in indigenous capacities, reduction in import dependence and savings in subsidy due to import substitution at prices below import Parity Price (IPP).
  • However, India meets 80% of its domestic demand of urea through indigenous production but depends on imports of Potassic and Phosphatic fertilizer requirements. These fertilizers also need more investment.
  • A modified New Pricing Scheme (NIPS) — 3 for existing urea units, notified to address under recoveries of existing urea units due to freezing of fixed cost at 2002-03 rates were implemented for 1 year from 2nd April 2014. Agriculture Policies since Independence: Fertilizers

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