GS Paper 3
Syllabus: Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices
Direction: The article highlights the reasons behind high urea, and DAP consumption, its impact and how to minimise the excess consumption.
- According to data from the Ministry of Chemicals and Fertilisers, the sale of urea and di-ammonium phosphate (DAP) increased by 3.7% and 16.9%, respectively, from April-October 2022 over the previous year.
- This has come even as sales of other fertilisers including complexes containing nitrogen (N), phosphorus (P), K (potash) and sulphur (S), have fallen.
- Two ambitious schemes of the Government of India – Soil Health Card and mandatory neem-coating of urea, were supposed to promote the balanced use of fertilisers.
- However, the annual consumption of urea (30 to 35 mt in the last 5 years) and DAP have grown over the years.
- This means, instead of providing a balanced mix of plant nutrients based on soil testing and crop requirements, Indian farmers are applying only urea and DAP – both containing 46% N and P, respectively.
Reasons behind increased consumption of urea and DAP:
- High subsidy on urea: The government has fixed the maximum retail price (MRP) of urea at Rs 5,628 per tonne, while the MRPs of other fertilisers are technically decontrolled.
- DAP – a cheaper substitute: Companies have been told not to charge more than Rs 27,000/tonne for DAP (Rs 29,000-31,000/ tonne for NPKS complexes), which has 46% P and 18% N.
- Thus, the choice of fertilisers is primarily a function of prices and not of NPKS complexes or other macro and micronutrients in the fertilisers.
The effects of overconsumption of urea and DAP:
- The current NPK ratio of 13:5:1, as against the ideal 4:2:1, would adversely affect crop yields
- It will adversely affect the health of plants and humans, due to the unavailability of a balanced nutrient mix.
- The government should replace subsidies on individual fertiliser products with a flat per-hectare cash transfer
- Every farmer can have an e-wallet account, which can be used only for the purchase of fertilisers.
- Maintaining a stock of decontrolled fertilisers to ensure no unexpected price increases.
Conclusion: Under-pricing of urea (a historical phenomenon) and DAP (recent) is a product of subsidy-induced market distortions. Thus, concerns over soil nutrient imbalances should take precedence over electoral politics.
Reforming the fertiliser sector
Q. How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? (UPSC 2017)
Prelims Links: UPSC 2020
Q1. With reference to chemical fertilisers in India, consider the following statements:
- At present, the retail price of chemical fertilisers is market-driven and not administered by the Government.
- Ammonia, which is an input of urea, is produced from natural gas.
- Sulphur, which is a raw material for phosphoric acid fertiliser, is a by-product of oil refineries.
Which of the statements given above is/are correct?
a. 1 only
b. 2 and 3 only
c. 2 only
d. 1, 2 and 3