While, replying to debate on President’s address, the prime minister unveiled a 5 points agenda for ushering in a technology-led second green revolution in India. One of these is issue of soil health card (SHC) to every farmer to apprise about status of his soil.
SHC will mention inter alia recommendations for fertilizer use taking in to account nutrient status of soil and crop type. The information will be computerized and each farmer given a unique identification number (UIN) to download the card for his farm.
If the mission can be achieved within 5 years term of this government and farmers start following recommendations as per their respective cards, it will revolutionize the way Indian agriculture is practised. However, mere possession of SHC will not take us very far!
For this to happen, apart from a massive awareness and education campaign – on a scale undertaken during the first green revolution in 60s and 70s – there is an urgent need to put in place a policy environment that actually galvanizes farmers to use fertilizers in a balanced and judicious manner.
To get maximum crop yield from fertilizer use and maintain soil health, a farmer needs to apply all 3 major nutrients viz., nitrogen (N), phosphate (P) and potash (K) in right mix. As a rule of thumb, agronomists recommend use ratio of 4:2:1. Ideally, it has to be customized to soil and crop specific situations.
Unfortunately, government policies by making P & K fertilizers viz., dia-ammonium phosphate (DAP), muriate of potash (MOP), single super phosphate (SSP) etc very expensive on one hand and urea – main source of N – ‘artificially’ cheap on the other, have led farmers use excess of N and less of P & K. That led to increasing imbalance and ratio at one point had deteriorated to 8.5:3.1:1 (1998-99). Currently at 8.2:3.2:1 (2012-13) use remains heavily imbalanced.
Fertilizers policy revolves around twin principles of controlling maximum retail price (MRP) at a low level and assuring to producers retention price (RP) which is higher. The difference is reimbursed as subsidy. Initially, all fertilizers (urea from 1977 and DAP/complex 1979 and SSP 1982) were covered under a uniform policy dispensation of retention price scheme (RPS).
In 1991, faced with an economic crisis, India approached IMF/World Bank who insisted on elimination of fertilizer subsidy within 3 years as a precondition for extending financial support. To comply with this, on August 25, 1992, government decontrolled DAP/complex fertilizers & SSP and abolished subsidy.
However, within 5 weeks from October 1, 1992, subsidy was resurrected under a new incarnation viz., ad-hoc concession. Controls on MRP too were revived albeit indirect. To begin with states exercised controls, from 1997-98, the baton passed on to central government.
From April 1, 2010, these fertilizers were brought under nutrient based scheme (NBS). Under NBS, government fixes ‘uniform’ subsidy – applicable to all manufacturers – expressed as Rs per unit nutrient N,P,K & Sulfur. Initially, producers were given freedom to fix MRP but subsequent actions have severely undermined it.
Vide DoF office memorandum dt June 26, 2013, government has been fixing ‘reasonable’ MRPs and manufacturers who charge more are penalized by denying subsidy for differential amount or even exclusion of concerned product from NBS. They are required to submit data on a monthly basis reminiscent of a license raj.
At another extreme, urea is treated as a holy cow and policy dispensation for it has remained un-altered since 1992 thus, creating a serious anomaly vis-a-vis decontrolled P&K fertilizers. In 2012, an eGoM recommended that former be also brought under NBS and committee of secretaries (CoS) was asked to work out the modalities. Two years since, nothing seems to be happening!
Continued dithering over reforms in urea on one hand and drastic reduction in subsidy on P&K fertilizers on the other has produced a deadly cocktail. This has spiked prices of P&K fertilizers 3-4 times since 2010 even as urea MRP increased by meagre 10 per cent. Currently, DAP sells at Rs 22,500 per ton 4 times urea price of Rs 5360 per ton. Price of MOP at Rs 15,500 per ton is 3 times urea.
During 2014-15, due to un-favourable monsoon and likely El Nino effect, fertilizer use will decline. P&K fertilizers will take a bigger hit primarily because of their high prices even as farmers continue with excess dose of urea. This will aggravate imbalance having catastrophic consequences for crop yield and soil health.
Government should act before things further slip out of control. Modi has talked of giving a bitter pill now for enabling ‘achchhe din’ later. He should implement NBS for urea without any delay. Concession should be fixed in a manner such that MRP of DAP is no more than twice price of urea, though ideally it should be 1.5.
This implies that manufacturers can aim at urea MRP of around Rs 11,000 per ton (22,500/2). Given average production cost of around Rs 16,500 per ton for all gas based units, this will require government to fix a uniform concession of Rs 5500 per ton (16,500-11,000), a drop of 50% over current level.
While, farmers will pay almost 100% more over current price of Rs 5360 per ton, this has to be seen in the backdrop of no increase for almost a decade. It will help fiscal consolidation via Rs 16,500 crores annual savings in subsidy (reduction in concession Rs 5500 per tonx30 million tons urea consumption).
The government may use a portion of saving in urea subsidy to increase concession on P&K fertilizers so that their MRP can be lowered from current elevated levels. It should also refrain from mopping up benefit of reduction in international price or rupee appreciation (through lower concession) if any, to give additional relief to farmers using these fertilizers.
It should remove all irritants in implementation of NBS by withdrawing DoF office memorandum of June 26, 2013. This is an anathema to freedom of pricing which must be preserved for scheme to deliver best results. Needless to say, such controls should be avoided while implementing similar scheme for urea.
The farmers and other stakeholders should accept the bitter pill in the hope of long-term benefits that will accrue via promoting balanced fertilizer use, increasing crop yield, improving soil health and less load on environment as nutrients are better utilized by plants.