The government has decided to cut subsidies on Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP) for 2012-13. This is the government’s latest move towards controlling the burgeoning fiscal deficit which has already breached its annual target of 4.6% of GDP in January. It has left urea untouched which is the most used crop nutrient and accounts for the bulk of government's spending on fertilisers.
The government has approved reduction in per Kg NBS (Nutrient Based Subsidy Policy) rates of fertilizer nutrients namely Nitrogen (N), Phosphate (P) and Potash (K) by 11.6%, 32.6%, and 10.3% respectively to Rs 24, Rs 21.804, and Rs 24. It has, however, kept the sulphur subsidy steady at Rs 1.677 per kg. This has led to a reduction in subsidy on DAP to Rs 14,350 a tonne, down by 27.4% from Rs 19,763 in 2010-11, and on MOP to Rs 14,440 from Rs 16,054, a fall of 10%. The rates will be effective from April 01, 2012.
At the announced rate, total subsidy outgo for the P&K fertilizers for the financial year 2012-13 would be reduced by more than 20%. The cut in subsidies has come in following the recent decline in global prices and an appreciating rupee combined with the government’s need to reduce the gap in its fiscal deficit.
It is also expected that the farmers will increase their usage complex fertilizers given a reduction in prices. Following the decontrol in April 2010, prices of non-urea fertilisers had almost doubled on account of rising global raw material costs and a weakening rupee. The farmers had shifted to cheaper urea during kharif and rabi seasons in the current financial year following an increase in phosphatic fertiliser prices.
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