DAP subsidy cut by Rs 15,792 a ton; low global prices to save govt bill

The Central Government has drastically reduced the subsidy on various variants of P&K fertilizers for the Kharif season 2023-24 under the Nutrient Based Subsidy (NBS) scheme on deregulated fertilizers. Di Ammonium Phosphate (DAP), the largest selling complex fertilizer among deregulated fertilizers, will get a subsidy of Rs 32,641 per tonne for the Kharif season.

In this regard, on May 18, the Department of Fertilizers notified new subsidy rates by issuing an office memorandum. This notification has been issued on the basis of the decision taken by the cabinet on May 17. According to the notification, the subsidy of DAP fixed for Kharif season (2023-24) during April 1, 2023, to September 30, 2023, will be Rs 15,792 per tonne lower than the subsidy fixed for DAP for Rabi season 2022-23 from October 1, 2022 to March 31, 2023 as per the notification issued on November 2, 2022.

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In Kharif 2023-24, DAP will get a subsidy of Rs 32,641 per tonne, while in November 2022, a subsidy of Rs 48,433 per tonne was fixed on DAP. Along with this, by issuing another office memorandum on May 18 itself, new rates of NBS have been fixed for the period January 1, 2023 to March 31, 2023 for Rabi season 2022-23, which are lower than the subsidy rate notified on November 2, 2022 for 22 variants of P&K fertilizers. As such, the subsidy on DAP has been reduced by Rs 7592 per tonne for the last three months of Rabi season. The subsidy on DAP has been fixed at Rs 40,841 per tonne for the period January to March 2023. DAP subsidy has been reduced by Rs 8200 per tonne for Kharif 2023-24 as compared to the second part of Rabi season 2022-23.

A source in the fertilizer industry told Rural Voice that global prices of DAP, which were hovering around $900 a tonne in January, declined to $550 a tonne in April and have come down to $460 a tonne at present. Price of DAP to farmers is Rs 1350 per bag (50 kg). In this case, this price comes to Rs 27,000 per tonne. The source said that with a subsidy of Rs 32,641 for the Kharif season, there will be no loss to the companies at the current import prices. But the reduction in subsidy rates for January to March 2023 will harm the companies.

Under NBS, the subsidy is given by the government for 25 variants of P&K fertilizers. Subsidy has been cut on most of the variants for the last three months of Rabi season 2022-23 and Kharif season 2023-24. This decision has been taken due to the steep fall in the prices of fertilizers and their raw materials in the global market. Fertilizer industry sources told Rural Voice that there will be no increase in the prices of DAP and other P&K fertilizers to farmers despite the subsidy cut by the government, but the move will result in huge savings in fertilizer subsidy to the government.

In the notification issued for the last three months of the Rabi season, it has been said that during this period, if the fertilizer companies have taken more subsidy on the basis of POS sale under the notification issued on November 2, 2022, then it will be adjusted against the pending subsidy bill of the company. As per the new rates, the subsidy under NBS for Kharif 2023-24 has been cut from Rs 641 to Rs 15,840 per tonne on 24 variants of complex fertilizers. Under NBS, the government fixes subsidy per kg for Nitrogen (N), Phosphorous (P), Potash (K) and Sulphur (S).

In the Kharif season (2023-24), the subsidy rates of all the four nutrients have been cut for the period from April 1, 2023 to September 30, 2023. For the Kharif season, the subsidy on Nitrogen (N) has been cut by Rs 21.53 per kg to Rs 76.49 per kg against the rates fixed in November for Rabi season. Subsidy on Phosphorous (P) has been cut by Rs 25.90 per kg to Rs 41.03 per kg, on Potash (K) by Rs 7.74 per kg to Rs 15.91 per kg and on Sulphur (S) by Rs 3.32 per kg It has been reduced to Rs 2.80 per kg. Subsidy has been cut on 24 variants of P&K fertilizers for this Kharif season. Subsidy on only PDM (Potash Derived from Molasses) has been increased by Rs 840 to Rs 2307 per tonne.

Along with this, the Department of Fertilizers has said in both the notifications that companies will have to submit cost data and the maximum retail price on P&K fertilizers to Department of Fertilizers. The profit earned above reasonable profit will be treated as unreasonable and will be recovered from the subsidy bill of such companies. It is clear from both the notifications issued by the Department of Fertilizers on May 18, 2023, that the government wants to take advantage of the continuous fall in global prices of fertilizers since December 2022 in the form of huge subsidy savings.

The government has made a provision of fertilizer subsidy of Rs 1,75,100 crore for the current financial year (2023-24) as against the revised subsidy estimate of Rs 2.25 lakh crore for the previous financial year (2022-23).