9 January 2023

Table of Contents

What should the government do to correct the worsening nutrient imbalance from over-application of urea and DAP

GS-3: Issues related to direct and indirect farm subsidies

Prices of fertilizers suddenly increased in 2022 due to covid-19 lockdowns by most countries and Russia’s invasion of Ukraine.

Though, prices of Urea, di-ammonium phosphate (DAP) and its intermediates/raw materials such as – Phosphoric acid, ammonia, sulphur and rock phosphate have been landed considerably since then. Only, prices of muriate of potash (MOP) have stayed elevated because Russia and its neighbouring ally Belarus together account for roughly 40% of global production and exports of MOP.

The fall of international fertilizer prices coincides with movements in world food prices as per Food Price Index, released by the Food and Agriculture Organization (FAO).

The Opportunity

• Availability of fertilizers: The soaring international prices and the post-war supply disruptions had made it difficult for companies to contract imports of both finished fertilizers and inputs for domestic manufacture.

• This scenario has been significantly improved for Rabi crop due to augmented fertilizer availability, coupled with good soil moisture conditions. The condition have helped boost area sown of wheat, mustard, maize and masur (red lentil).

• Reduction in fertilizer subsidy: The government had budgeted Rs 105,222.32 crore for 2022-23, but the actual subsidy could touch Rs 230,000 crore, which is even higher than Rs 153,658.11 crore spent in the previous fiscal.

• Assuming no more geopolitics-induced supply shocks, the may expect the subsidy bill to be within Rs 140,000-150,000 crore for the next fiscal.

Steps taken to prevent people from using too much fertilisers

• In 2010, the government started a nutrient-based subsidy (NBS) regime in fertilisers and fixed a per-kg NBS rate for each nutrient (N, P, K and sulphur or S).

• This move was aimed to promote balanced and complexed fertilization and helped government to move away from product-specific subsidy.

• In 2015-16, the government made coating of urea with neem oil compulsory to check illegal diversion of the heavily-subsidised fertiliser for non-agricultural uses, including by plywood, dye, cattle feed and synthetic milk makers. 

• Further, Neem oil also can act as a mild nitrification inhibitor, allowing a more gradual release of nitrogen.
• Increased nitrogen use efficiency would, in turn, bring down the number of urea bags required per acre.  

Challenge: Imbalanced application of fertilizers

• Since, 2017-18 urea consumption is rising continuously. In addition, consumption of NPKS complexes and single super phosphate (SSP), which were lower than 2011 in 2019, again rose in 2020-21 and 2021-22. 
• Due to shortages of DAP and MOP, people replaced one bag of DAP with one bag each of SSP and 20:20:0:13, which led to worsening of nutrition imbalances.
• At present, consumption of both urea and DAP has shot up whereas sales of complexes, SSP and MOP have plunged.
• These imbalances are also due to disturbances in the price hierarchy as urea was and is still the country’s cheapest fertilizer.

• Moreover, under NBS regime, Non-urea fertiliser prices have technically been decontrolled but the government also fixed NBS rates in such a manner that favour over-application of DAP similar to urea.

Way Forward

• Restrict DAP use to rice and wheat.
• Improve flawed price hierarchy to prevent DAP becoming the next urea.
• Raise SSP’s acceptance by permitting sale only in granular, not powdered form.

• SSP powder is prone to adulteration with gypsum or clay. 
• SSP granules provide quality, which will also promote slower release of P without drift during application.

[Ref- IE] 

Fact File