The Union Fertiliser Ministry will develop a mechanism to compensate the fertilizer industry for the higher production costs that will be incurred in order to produce fertilizers without raising the subsidy factor.
According to sources, Union Minister for Chemicals and Fertilisers Mansukh Mandaviya stated this at a meeting called to discuss fertilizer supply for the rabi season in New Delhi.
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Subsidies will not be increased, but a mechanism will be created to bridge the gap between higher production costs and maintaining diammonium phosphate’s (DAP) current selling price, he said.
However, he stated that the government is not considering any assistance for the production of complex NPK (nitrogen, phosphorus, potassium) fertilizer, which is expected to impact crop nutrition balance.
The Minister also directed fertilizer companies to increase production in order to ensure an adequate supply during the upcoming rabi season.
The government has urged the industry, including the companies that come under the public sector segment, to normalize supplies of DAP ahead of the Rabi sowing season, which begins next month.
Keeping fingers crossed
Fertilizer companies are crossing their fingers because there is no clear plan for how the compensation mechanism will work. Their concerns stem from rising logistics and transportation costs caused by a lack of vessels and containers to transport the consignments. Shipping costs have nearly doubled, ramping up manufacturing costs.
Fertilizer demand is high in the United States and Brazil, with a significant increase in corn and soybean area planted amid record prices for both crops.
As an outcome, demand for fertilizers in these nations has remained strong, limiting global supplies and starting to push fertilizer prices to decade-high levels. Because domestic supplies are limited, the Indian fertilizer industry is dependent on imports to meet demand.
Also Read: ICRA predicts that global fertilizer prices will rise as China suspends exports
Farmers in the northern and central states are expecting a bumper crop of wheat, mustard, potato, onion, sugarcane, and maize, which will require more fertilizer due to Covid logistics restrictions.
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