Fertilizer subsidy: expenditure for fiscal year 23 at Rs 1.3 lakh crore

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This is when fuel subsidies were curtailed and should be almost eliminated in the current budget itself.

The Centre’s fertilizer subsidy bill could be budgeted at Rs 1.3 lakh crore for the next fiscal year (2022-2023), signaling its potential to be a steadily growing and sticky item on the spending side of the city. income. This is when fuel subsidies were curtailed and should be almost eliminated in the current budget itself.

This would be the third year in a row in 2022-2023 that the annual budgetary expenditure for fertilizer subsidies hovered around Rs 1.3 lakh crore from a lower range of around Rs 70,000 to 80,000 crore for a few years in the past. . The subsidy bill rose 57% year on year to reach Rs 1.27 lakh crore in FY21 as the government cleared arrears of around Rs 65,000 crore under packages related to Covid. Soaring international prices for fertilizers, as well as key ingredients, are expected to inflate the fertilizer subsidy to Rs 1.38 lakh crore in FY22, up 73% from the budget estimate (BE ) of Rs 79,530 crore.

With the persistence of Covid-19 and the government unwilling to upset farmers, prices will not be allowed to rise in phosphate and potassium (P&K) fertilizers, including diammonium phosphate (DAP) in fiscal year 23 also, an official aware of the matter said FE. “To alleviate the shortage of DAP, the fertilizer companies have been urged to make the necessary arrangements for imports in a timely manner to avoid shortages or chaos in the market. Subject to price developments, subsidy outflows next year could be around Rs 1.3 million lakh, ”the official said.

Urea is supplied to all farmers across the country at a maximum retail price notified by law of Rs 242 / per 45kg bag (excluding neem coating fees and taxes where applicable) from the 1st. March 2018. Urea phosphate and potassium (P&K fertilizers), including DAP, are however largely deregulated with a fixed subsidy element and are covered by a nutrient-based subsidy scheme (NBS). As a result of price volatility in international markets, NBS subsidy rates increased from $ 10,231 / MT in April 2021 to Rs 24,231 / MT in May and to around Rs 33,000 in October.

The surge in fertilizer subsidies was sparked by rising global rates. The prices of urea, the most commonly used fertilizer, have tripled to around $ 990 / tonne while the price of DAP has more than doubled to reach $ 700-800 per tonne from the previous level. is one and a half years old. Today, rising input costs are putting additional pressure on prices. Crisil Ratings expects the price of natural gas – the raw material that accounts for 75-80% of the total cost of producing urea plants – to increase by more than 50% from last year.

For P&K fertilizers, India is 90% dependent on imports.

The Centre’s plan to save on fertilizer subsidies through direct benefit transfer (DBT) has also been on hold for the time being. Prolonged protests by farmers forcing the withdrawal of three laws and looming parliamentary elections in five states, including politically decisive Uttar Pradesh in 2022, have weighed on the minds of policymakers. The government was keen to deploy DBT to combat pilferage, which could have helped reduce subsidies.

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