New Delhi: Prices of DAP (diammonium phosphate), a key fertilizer for farming in India, are likely to increase next month. Currently, the price of a 50 kg bag is Rs 1350, which may increase by Rs 200. The central government provides a special subsidy of Rs 3,500 per tonne to provide DAP to farmers at a cheaper rate, which is set to expire on December 31. Recently, the prices of phosphoric acid and ammonia used in making DAP have increased by up to 70 percent, which is impacting fertilizer prices.
Subsidy Scheme for Phosphate and Potash
For Phosphate and Potash (P&K) fertilizers, the Central Government has implemented Nutrient Based Subsidy (NBS) Scheme since April 2010. Under this scheme, subsidies are given to manufacturing companies every year. The P&K sector is deregulated, allowing companies to produce and import fertilizer as per market needs. However, if the period of special subsidy is not extended, DAP prices are set to increase from January 1. This year, the subsidy on DAP per tonne in Kharif season was Rs 21,676, which has been increased to Rs 21,911 for the next Hari season (2024-2025).
Burden on industry due to removal of subsidy
If continuation of special subsidies is not considered, the industry will have to bear the burden. The rupee has weakened against the dollar in recent times, and DAP is still priced at $630 per tonne in the international market. Due to the weakening of the rupee, the import cost has increased by about Rs 1,200 per tonne. If subsidies were also removed, the cost would increase to around Rs 4,700 per tonne, which could make per bag costlier by Rs 200. It is noteworthy that two years ago a 50 kg bag was available for Rs 1200, but now it has increased by Rs 150.
Import of DAP
India had a requirement of 93 lakh tonnes of DAP this year, of which 90 per cent was to be met through imports. However, due to increase in DAP prices in the international market, imports decreased, leading to a DAP crisis in the country. But due to the initiative of the government, imports have now increased and there has been success in reaching it to the farmers.
