Farmers to get DAP bag for Rs 1,200 only; Govt goes for a massive Rs 700 increase in subsidy

The central government has announced a massive 140 per cent increase in subsidy in order to make the 50kg bag of di-ammonium phosphate (DAP) available to the farmers at the earlier rate of Rs 1,200 only. Fertilizer companies had increased the DAP price up to Rs 1,900 per bag in the wake of the increase in raw material prices in the international market. The government will spend Rs 14,775 crores to keep the prices at the earlier level.

Now that the subsidy for DAP has been increased, the farmers will not be affected by the rise in raw material prices in the international market. The announcement of the increase in subsidy on DAP by the government was made public by the Press Information Bureau (PIB) through a press release Wednesday evening. Fertilizer producer companies had increased the prices of DAP and other complex fertilizers by 45 to 58 per cent at the beginning of April in the wake of high raw material prices. The DAP price had been raised from Rs 1,200 per bag (50kg) to Rs 1,900 per bag.

In conversations with RuralVoice, industry sources had categorically stated that owing to the massive increase in raw material prices, it would not be possible to keep the price at its earlier level in absence of an increase in subsidy.

The press release issued by the government on May 19 says that Prime Minister Narendra Modi chaired a high-level meeting on the issue of fertilizer prices. A detailed presentation was given to him on this issue.

It was discussed in the meeting that the prices of fertilizers were undergoing an increase due to the rising prices of phosphoric acid, ammonia, etc internationally. The Prime Minister emphasized that farmers should get the fertilizers at old rates despite the international rise in prices.

A historic decision was taken to increase the subsidy for DAP fertilizer from Rs 500 per bag to Rs 1,200 per bag, which is an increase of 140%. Thus, despite the rise in international market prices of DAP, it has been decided to continue selling it at the older price of Rs 1,200. Besides, the central government has decided to bear all the burden of the price hike. The amount of subsidy per bag has never been increased so much at once.

The release states that last year, the actual price of DAP was Rs 1,700 per bag. In this, the central government was giving a subsidy of Rs 500 per bag. So, the companies were selling the fertilizer to the farmers at Rs 1,200 per bag.

Recently, the international prices of phosphoric acid, ammonia, etc used in DAP have gone up by 60 to 70 per cent, says the release. So, the actual price of a DAP bag is now Rs 2,400, which would have been sold by fertilizer companies at Rs 1,900 after considering a subsidy of Rs 500. With the May 19 decision, farmers will continue to get a DAP bag for Rs 1,200.

The Prime Minister remarked that his government was committed to the welfare of farmers and will make all efforts to ensure that farmers do not have to face the brunt of price rise.

According to the release, the central government spends about Rs 80,000 crores on subsidies for chemical fertilizers every year. With the increase in subsidy on DAP, it will spend an additional Rs 14,775 crores as subsidy in Kharif season.

The protests of farmer organizations and political parties had been intensifying due to the massive increase in the prices of decontrolled fertilizers. Besides, significantly, the Ministry of Fertilisers had issued a memorandum on April 9, 2021, wherein it announced that the subsidy rates for non-urea fertilizers under the Nutrient-Based Subsidy (NBS) scheme for the current financial year (FY) 2021-22 would continue to be at the same levels as in FY 2020-21 until further order. RuralVoice had then done a detailed story on this. Meanwhile, the Joint Secretary in the Department of Fertilisers wrote a letter to the fertilizer industry on May 17, 2021, instructing the companies to keep the prices reasonable and not to increase the prices for undue profit. RuralVoice had done a story regarding this letter, on May 19 afternoon, saying that the letter indicated that pressure was mounting on the government to increase the subsidy. And in the very evening of May 19, 2021, the government announced the increase of subsidy for DAP. The government has called this announcement “a historic decision”.

The subsidies on DAP and other complex fertilizers are granted under the NBS scheme. It fixes subsidy rates for each of the nutrients and the subsidy for complex fertilizers is calculated on the basis of the ratio of the nutrients added by the companies. A subsidy of Rs 10,231 per tonne was being granted on DAP until the announcement on May 19 evening. Once the government notifies the new NBS rates subsequent to this announcement, the situation regarding the prices of the remaining fertilizers will also become clear. This announcement speaks only about the DAP prices.

Speaking to RuralVoice on the government’s decision to increase the subsidy for DAP and continue with the old price, Rakesh Tikait, national spokesman for the Bharatiya Kisan Union (BKU) and farmer leader, reacted, “This step of the government should be welcomed and it will reduce the burden on the farmers.” He said that this step of the government was a result of the pressure created by the continuously intensifying protests of the farmer organizations against the increased prices of fertilizers. “We consider this decision to be a positive step. Hope the government shows the same positive attitude regarding the three new farm laws and soon takes the decision to repeal the laws and make MSP (Minimum Support Price) a legal right.”