First urea, now DAP: High use of subsidised fertilisers raises crop yield fears

Subject: Economy

Context-

After Urea, another fertilizer is seeing a similer phenomenon of over-application due to underpricing- Di-Ammonium Phospate (DAP).

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This could have implications for soil health, ultimately affecting crop yields.
The use of nitrogen (N), phosphorous (P) and potassium (K) in the country has over the last few years sharply deviated from the ideal NPK use ratio of 4:2:1. According to Fertilizer Association of India (FAI), the N:P:K ratio was 8.2:3.2:1 in 2011-2012.
Data shows a 3.7% increase in the sale of urea, while increase in the sale of DAP is 16.94%, while sale of other fertilizers have declined.
The maximum retail price (MRP) of urea is currently fixed at Rs 5,628 per tonne.
The other fertilisers are technically “decontrolled” since April 2010, with the Centre only paying a fixed per-tonne subsidy to ensure “reasonable levels” of prices.

What is Diammonium Phosphate (DAP)?

DAP is the second most commonly used fertiliser in India after urea.
Farmers normally apply this fertiliser just before or at the beginning of sowing, as it is high in phosphorus (P) that stimulates root development.
DAP (46% P, 18% Nitrogen) is the preferred source of Phosphorus for farmers. This is similar to urea, which is their preferred nitrogenous fertiliser containing 46% N.

Status of fertilizer industry in India-

Fertilizer as an industry is under the control of the Union Government (being in the First Schedule of the IDR (Industries (Development and Regulation)) Act, 1951 vide Entry 52 of List I and also Entry 33 of List III.
GoI has declared fertilizers as an essential commodity.GoI issued the Fertilizer Control Order (FCO) under the Essential Commodities Act, 1957.
No subsidy was paid on Fertilizers till 1977 except Potash for which subsidy was paid only for a year in 1977.
Retention Pricing Scheme (RPS):
- Introduced for nitrogenous fertilizers in 1977.
- Later, it was extended to phosphatic and potassic fertilizers (Including Imported fertilizers).
- In this, the difference between retention price (cost of production as assessed by the government plus 12% post-tax return on net worth) and the statutorily notified sale price was paid as a subsidy to each manufacturing unit.
- This was the beginning of the “Product-based subsidy”