Agriculture Policy Briefing

Ananth Kumar Telling Companies to Cut DAP, MoP Prices Reverses Reforms of 25 Years Ago

Union Chemicals and Fertilizers Minister Ananth Kumar announcing his decision on 4 July 2016. Photo credit: PIB

The prices of Di-Ammonium Phosphate (DAP) and Muriate of Potash (MoP) were decontrolled by Manmohan Singh as finance minister in his reform budget of July 1991. Urea prices were raised by 40 percent but had to be rolled back by 30 percent following an outcry. Recently, union chemicals and fertilizers minister Ananth Kumar announced that fertilizer companies have ‘agreed’ to cut prices of DAP and MoP by Rs 2,500 and Rs 5,000 a tonne respectively.

The Indian Express in an editorial termed this as yet another instance of the government’s anti-reform moves in agriculture.

Except for state-owned companies ─ National Fertilizers Limited and Rashtriya Chemicals & Fertilizers ─no company is willing to oblige, reports the paper’s Harish Damodaran. He adds that the two companies are urea producers; they recently imported 86,000 tonnes of DAP, which is a fraction of the 10 million tonnes India consumes annually.

The price of DAP has declined from Rs 26,528 a tonne (f.o.b. Gulf according to Index Mundi) last December to Rs 23,343 a tonne in May. That is a reduction of Rs 3,239 a tonne. But the government has cut the subsidy on DAP by Rs 3,050 this financial year, from Rs 12,350 to Rs 9,300 a tonne. If the minister wanted prices reduced, he should have increased the subsidy, the companies say.

India imports 30 percent of its DAP requirements and 100 percent of potash. DAP is the second most consumer fertilizer after DAP.

The Express says the government must carry forward Manmohan Singh’s reform of 25 years ago by decontrolling urea as well and give a flat per-hectare subsidy. Farmers can decide how much of what fertilizer to use. This will allow  balanced fertilizer use, unlike the current situation where farmers use more of cheap urea, damaging the soil.

But implementing a flat subsidy is not easy because rural land records are in a mess. Giving the subsidy to cultivators who have leased in land is also problematic, as leases are not usually on paper. But a beginning can be made.

Harish Damodaran’s report.

Indian Express editorial

(Top photo of Union Chemicals and Fertilizers Minister Ananth Kumar telling journalists on 4 July, 2016 that fertilizer companies have ‘agreed’ to reduce DAP and MOP prices. Credit: Press Information Bureau)

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