Fertilser glut as policy change makes farm nutrients unaffordable to farmers

Fertiliser companies in India are expected to end the current financial year with record unsold stocks as sales declined more than 11 per cent in the third quarter of 2012-13 alone after the government decided to do away with nutrient-based fertiliser subsidies and instead decided to pay subsidies direct to the farmers.

While the decision to cut subsidies on fertilisers was aimed at checking the misuse of subsidies by fertiliser firms and indiscriminate use of fertilisers by farmers, the policy has failed to address the financial woes of the farmer and the lax bureaucracy that dispenses with the subsidies.

With a mark-up in the retail prices of urea and potash, fertiliser companies are expected to start the next financial year with record high stocks of close to 8 million tonnes, according to industry sources.

Since rabi 2011, retail prices of di-ammonium phosphate (DAP) have increased by almost a third to Rs24,000 per tonne from Rs18,200 a tonne. The price of muriate of potash (MoP) has shot up to Rs17,000 a tonne from Rs12,000 a tonne.

Retail prices of single super phosphate (SSP) soared to Rs7,800 from Rs4,800 and that of the standard complex (fertilizer 10:26:26) has shot up to Rs22,000 per tonne from Rs16,000 a tonne.

While the fertiliser industry is pinning hope on a pick-up in rabi offtake, the government is faced with the twin dilemma of overflowing food stocks with no proper storage system and heavy unsold stocks of fertilisers after the government decided to let industry fix prices.