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The Centre has prolonged a particular subsidy of Rs 3,500 per tonne on di-ammonium phosphate (DAP), which was to finish on December 31, for an extra one-year interval from January 1, 2025.
The choice, cleared by the Union Cupboard Wednesday, is aimed toward containing any surge in farmgate costs of India’s second most-consumed fertiliser. That stress is extra, given the rupee’s latest slide in opposition to the US greenback.
The Modi authorities has informally frozen the utmost retail costs (MRP) of all non-urea fertilisers. That is regardless of them being “decontrolled” on paper, not like urea whose MRP has been statutorily mounted at Rs 266.50 per 45-kg bag (after neem-coating and items and companies tax) since November 2012.
Firms aren’t being allowed to cost greater than Rs 1,350 for a 50-kg bag of DAP, with the corresponding per-bag MRPs at Rs 1,300 for the favored complicated fertiliser ‘20:20:0:13’, Rs 1,470 for ‘12:32:16:0’ and ‘10:26:26:0’, and Rs 1,500-1,600 for muriate of potash.
However the rupee’s steep fall has made these casual value caps troublesome to maintain. Within the case of DAP, its landed import value of $632 per tonne works out to about Rs 54,160 at this time alternate charge of Rs 85.7-to-the-dollar. That’s greater than the Rs 52,960 per tonne three months in the past, when the rupee was at 83.8-to-the-dollar.
Fertiliser corporations are being given a subsidy of Rs 21,911 per tonne on DAP, plus the “one-time particular bundle” concession of Rs 3,500 that has now been prolonged till December 31, 2025. Along with the MRP of Rs 1,350/bag or Rs 27,000 per tonne, it takes the gross realisation to Rs 52,411, which doesn’t cowl even the landed import price of Rs 54,160.
What business is flagging
The federal government stated its determination to increase the particular subsidy on DAP will assist farmers, however issues are rising over the affect of the falling rupee. The business is underlining that DAP imports is not going to be viable until the federal government will increase the subsidy or permits it to revise the MRP upward.
“If you happen to add all different bills – 5 per cent customs obligation, port dealing with, bagging, curiosity, insurance coverage, seller margins, and so on. – the whole price of imported DAP as we speak can be Rs 65,000 per tonne. Imports are unviable until the federal government will increase the subsidy or permits us to revise the MRP upward,” an business supply informed The Indian Categorical.
Earlier, on September 20, the federal government additionally accepted full compensation to fertiliser corporations for any DAP imports undertaken at a landed value above $559.71 per tonne. This value distinction over the bottom benchmark charge was payable for shipments arriving from September 1, 2024 to March 31, 2025. Furthermore, the alternate charge taken for the compensation was Rs 83.23-to-the-dollar.
“All these calculations have gone haywire with the rupee plunging beneath 85.7,” the supply stated. Even with the extension of the Rs 3,500/tonne particular subsidy, corporations could have to boost the MRP of DAP to offset the roughly Rs 1,500/tonne affect of depreciation. The required MRP improve would have been extra had the Rs 3,500/tonne particular concession ended on December 31. The whole fiscal price of the additional subsidy is estimated at Rs 6,475 crore.
It stays to be seen if the federal government will allow corporations to impact the minimal MRP hike. The political price is probably not a lot as a result of solely Delhi and Bihar – each not main agriculture states – are scheduled to go to Meeting polls this yr.
Additionally, the present consumption season for DAP is over. With rabi crop sowings from October onwards nearly accomplished, any MRP improve would probably not be felt at this level.
Crucial precedence for the federal government shall be to make sure ample fertiliser availability for the subsequent kharif season from June-July. Shares of each DAP and complicated fertilisers, at 9.2 lakh tonnes (lt) and 23.7 lt respectively as in mid-December, are beneath their corresponding year-ago ranges of 13 lt and 32.3 lt.
“We one way or the other managed this season with the out there shares. However with out adequate imports within the subsequent few months, each of completed fertilisers and intermediates/uncooked supplies, there shall be issues,” the supply stated.
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