SOWING SUBSIDIES.REAPING VOTES

The DAP subsidy extension shows the government's focus on stabilizing the fertilizer sector, with increased NPK sales crucial ahead of upcoming elections

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The government recently announced an extension of its one-time subsidy package for the fertilizer Di-Ammonium Phosphate (DAP). Initially introduced in July ‘24 with a deadline of December ‘24, the package will now continue indefinitely or with no particular end date.

This special subsidy is in addition to the support provided under the government’s nutrient-based subsidy (NBS) regime for the fertilizer sector. The move aims to ensure a steady supply of DAP fertilizer to farmers across the country.

DAP, a fertilizer comprising 18% nitrogen (N) and 46% phosphorus (P), is the second most widely used fertilizer in India, after urea. Farmers typically apply DAP during sowing or at the early stages of crop root development.

Fertilizers, both natural and chemical, provide essential nutrients like nitrogen, phosphorus, potassium (K), and sulphur (S), which are vital for agricultural growth. Among these, chemical fertilizers play a pivotal role in boosting productivity and enabling India to become self-reliant in agricultural produce.

However, producing or importing DAP at current prices is unviable without financial assistance. The sharp depreciation of the Indian Rupee (INR) has added to the challenges faced by the sector.

Research indicates that the landed import price of DAP has risen to approximately ₹54,160 per tonne with an exchange rate of ₹86 to the US dollar, compared to ₹52,960 per tonne three months ago when the rupee traded at ₹83 to the dollar.

India’s annual domestic production of DAP is around 4.5 million tonnes (MT) to 4.8 million tonnes, while the demand stands at 10 MT to 11 MT. This means a huge portion must be imported.

Also, the raw materials essential for domestic DAP production, such as rock phosphate and phosphoric acid - both scarce natural resources - are imported into the country.