Fertiliser subsidy hike costing exchequer Rs 60,000 crore in lost tax gets thumbs up from Cabinet

Cabinet on April 27 approved about fifty percent hike in subsidy for NPK fertilisers to cushion the impact from a surge in global raw materials prices, sources said.

Cabinet chaired by prime minister Narendra Modi okayed the proposal to increase the subsidy from Rs 1,650 to Rs 2,500 per bag which will cost the exchequer about Rs 60,000 crore. New subsidy rates will apply from 1 April.

This comes as fertiliser companies have started passing on a portion of rising input costs to farmers with reports saying that fertiliser major IFFCO has raised the price of DAP from Rs 1,200 to Rs 1,350 per 50 kg bag (an increase of 12.5 per cent) while NPKS rate has been raised from Rs 1,290 to Rs 1,400 per 50 kg bag (an increase of 8.5 per cent).

For other grades of NPK fertiliser - NPK-1 and 2 - the price has increased Rs 20 to Rs 1,470 per bag.

More recently, the government on April 19 asserted that there will not be any fertiliser shortage in the upcoming kharif sowing season and it will soon announce the subsidy rate for non-urea soil nutrients for the current fiscal.

Availability of NPK fertiliser is pegged at 77.87 lakh tonne against the requirement of 63.71 lakh tonne in the 2022 kharif season, fertiliser secretary RK Chaturvedi had said addressing a conference on preparedness for the kharif sowing operation that starts with the onset of the southwest monsoon from June.

Also, recent reports have pointed out that the fertiliser subsidy for the current fiscal could go as high as Rs 2.30 trillion -- the biggest spending on fertiliser subsidy in a year dwarfing the FY23 budget estimate of Rs 1.05 trillion -- as commodity and oil prices rage due to the war in Ukraine.

Generally, the fertiliser subsidy remains about Rs 80,000-85,000 crore in a year, but it has been higher in the recent past.