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LATEST NEWS UPDATES | Fertilizer plan won’t help soil: Experts by Amit Bhattacharya

Fertilizer plan won’t help soil: Experts by Amit Bhattacharya

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published Published on Feb 21, 2010   modified Modified on Feb 21, 2010

The new nutrient based subsidy (NBS) regime cleared by the Union Cabinet on Thursday is likely to slash the governments subsidy bill and boost fertilizer production. But one of the major stated aims of the policy that of promoting a more balanced use of fertilizers by farmers may not be actualized unless other measures are implemented in tandem.

That seems to be the view of many agriculture experts and economists, who reacted to the governments announcement of decontrolling the prices of all fertilizers, except nitrogen-based urea, from April 1 this year.

The policy, in part, seeks to address the problem with the existing subsidy regime, which is skewed in favour of urea, leading to its overuse by farmers to the detriment of other essential nutrients. By decontrolling the prices of potassic (K) and phosphatic (P) fertilizers, but still having a lever of control through a system of fixed subsidy, the government hopes to keep the relative prices of these nutrients low as compared to urea. This will lead to farmers using more P, K and micro-nutrient based fertilizers, policy makers feel.

It is true that our farmlands need a more balanced and discerning use of fertilizers, but I am not sure whether this policy would be able to achieve that, said Devinder Sharma, a food policy analyst. For one, farmers do not know how much P and K need to be used. Secondly, the infrastructure for soil testing, which is essential if the right amounts of fertilizers are to be used, is abysmal. The government needs to invest in these areas as well.

D K Joshi, principal economist with Crisil, agrees. The impact of the new policy would be more immediate in reining in the governments subsidy bill. Redressing the nutrient imbalance in soil will require time and more policy measures.

Rakesh Tikait, general secretary of the Bharatiya Kisan Union, fears that fertilizer decontrol will lead to a hike in prices. While the government has said it would intervene if prices of fertilizers rise, in effect the market will rule prices. When the government has failed in checking price-rise of every other item, how can it control fertilizer prices?

Tikait said a much better method of farm subsidy would be to give money directly to farmers. At the moment, the government subsidy for every acre of farmland is to the tune of Rs 3,800. Why cant this money be directly given to farmers? Let them then buy fertilizers at market rates. The current subsidy regime promotes black-marketing, he added.

Other experts felt the governments decision to raise urea price by 10% and give fixed subsidy for other fertilizers would boost the industry and help raise fertilizer production. Said Ramesh Chand, national professor at National Centre for Agricultural Economics and Policy Research, said: Urea prices were frozen for seven years. The hike was overdue given the healthy rise in the minimum support price during this period. If you account for inflation, the real price of urea would still be lower than last year. Fixed subsidy regime would help fertilizer industry raise production and innovate.

While agreeing that the policy will encourage the fertilizer industry to introduce innovative products, Sudip Sural, head of corporate ratings at Crisil who looks after the fertilizer sector, had a word of caution. We also believe that the decontrol policy will also result in higher volatility in the profitability of players in the industry. Operating efficiencies, therefore, will assume critical importance for complex fertilizer players, he said.


The Times of India, 22 February, 2010, http://timesofindia.indiatimes.com/india/Fertilizer-plan-wont-help-soil-Experts/articleshow/5601003.cms
 

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