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Farmers desperate for fertiliser reforms
Farmers desperate for fertiliser reforms. ndia could save about $1.8 billion on fertiliser subsidies this year thanks to low energy prices but Prime Minister Narendra Modi\'s government, two sources said, has no plans to remove price controls, a reform that would risk angering farmers.
India could save about $1.8 billion on fertiliser subsidies this year thanks to low energy prices but Prime Minister Narendra Modi's government, two sources said, has no plans to remove price controls, a reform that would risk angering farmers. Industry groups had hoped that the reform-minded Modi would use the opportunity presented by lower prices to free up the fertiliser market, as he did with diesel a year ago.
But stung by opposition to his reforms, including the defeat of a pro-industry land reform that opponents said was damaging for farmers, Modi is now more cautious of angering rural voters. About two thirds of India's population lives in the countryside, and the prime minister is currently campaigning in the large rural state of Bihar, where assembly elections are due in a few weeks.
"Currently, there is no plan to raise urea prices, possibly for the next few years," according to a senior official at the Fertilizer Ministry. He said falls in naphtha and gas prices would likely reduce the fertiliser subsidy bill to 600 billion rupees ($9.1 billion) this fiscal year, about 18 percent below last year.
The savings will help India towards its goal of reducing the fiscal deficit to 3.9 percent by the end of March, while simultaneously increasing spending on roads and rail in an attempt to revive the economy with a government-led stimulus. Import tax on urea, now five percent, could be hiked to protect domestic producers from Chinese imports if Yuan were to weaken further.
"Due to the fall in international gas prices, benefits from the fall in fertiliser subsidy bill could accrue to the government this fiscal year," said Finance Ministry spokesman D.S. Malik. "There was a lot of expectation when Modi came to power. We are a bit disillusioned.
We do not see any change as far as policy, payment of subsidies or ease of doing business are concerned," said Satish Chander, Director-General of the Fertiliser Association of India.
Farmers pay Rs 5,360 per tonne for subsidised urea, almost unchanged since 2000. Nutrients like Di-Ammonium Phosphate (DAP) and potash, which are partly subsidised, cost three to four times more.
India now produces urea at about $375 a tonne, industry experts say, meaning any change to the subsidy would be quickly felt by both farmers and fertiliser companies. Finance Ministry officials said a lack of land records meant it would be difficult to shift to cash transfers anytime soon.
By Manoj Kumar and Mayank Bhardwaj
