Big News for Farmers! Non-Urea Fertiliser Subsidy Hiked to Rs 61,000 crores; Know the Cost of DAP per bag

Due to the ongoing Russia-Ukraine crisis, the Centre yesterday granted a subsidy for non-urea fertilizers worth Rs 60,939.23 crore for the first six months of this fiscal year. Companies would be able to continue supplying important soil nutrients to farmers at reasonable prices as a result of the change.

For the entire FY-23, this is over 45.23 percent more than the Budget Estimates for non-urea fertilizers. Companies would be able to sell one bag of Di-Ammonia Phosphate (DAP) for Rs 1350 after yesterday's support since the Centre will absorb the remaining cost, estimated to be roughly Rs 2501, as a subsidy.

Until last year, the per-bag DAP subsidy was Rs 1,650, representing an almost 50% increase in FY-23. DAP prices were raised by Rs 150 per bag earlier this month, from Rs 1200 to Rs 1350, by fertilizer companies.

Increased prices for NPKS ranged from Rs 20 to Rs 110 per 50-kilogram bag, depending on the grade. "After today's subsidy support, most companies will be able to maintain their price hikes. If input costs had continued to rise, they would have had to raise DAP and NPKS prices even higher," a senior industry official said.

After urea, DAP is the second most widely used fertiliser in the country in terms of volume.  The subsidy rates for other complex fertilisers, such as various grades of NPKS, SSP, and MOP, were calculated using the NBS formula. The urea subsidy for the fiscal year 2022-23 is still waiting.

The subsidy rates for other complex fertilisers, such as various grades of NPKS, SSP, and MOP, were calculated using the NBS formula. The urea subsidy for the fiscal year 2022-23 is still pending.

According to the FY23 Budget Estimates, the subsidy allowed for both DAP and NPKS (different grades) fertilisers is over 45.23 per cent higher than the subsidy allotted for non-urea fertilisers.

So, the Central government had provided a subsidy of Rs 42,000 crore for non-urea fertilisers in the Budget for the entire FY-23, but in today's decision, it has allocated an additional Rs 19,000 crore, but just for the first six months of this financial year until September.

The NBS converts the per-kg subsidies for the nutrients N, P, K, and S into per-tonne subsidies for the various P&K fertilizers covered by the NBS. The government announces a fixed amount of subsidy (in Rs per kg) for nutrients such as Nitrogen (N), Phosphate (P), Potash (K), and Sulphur (S) on an annual basis under the NBS, which has been in effect since April 2010.

The Centre sets maximum retail pricing for urea and reimburses the difference between the maximum retail price and the production cost as a subsidy.

Meanwhile, since the Russia-Ukraine conflict, urea manufacturing costs have increased due to high gas prices, while non-urea fertilizer prices have been negatively impacted due to a scarcity of key raw materials and finished products.

The subsidy required for the urea sector might climb by about Rs 4,500-5,000 crore for every $1/MMBtu increase in pooled gas price, according to rating agency ICRA. Even while companies recently raised pricing in retail marketplaces for non-urea fertilizers, it was not enough to pay their high production costs.