India's Looming Fertiliser Deficit.

The fertiliser sector is in a state of flux and proactive policy is vital to augment domestic output to meet fast-growing demand, with an inefficient international market for crop nutrients, riddled with price distortions. It is the gist of a recent working paper at IIM Ahmedabad , by Vijay Sharma and Hrima Thaker.

The recent tentative policy moves to overhaul the massive Rs 50,000 crore fertiliser subsidy regime and make it nutrient-based makes sense, but what's really required is the scope for price-efficient signals to rev up output, especially of nitrogenous (N) fertiliser or urea, the most used (rather excessively) and heavily subsidised.

Giving fertiliser producers the freedom to set product prices will allow farmers to benefit the most from innovative, soil-specific nutrients, and rationalise the entire subsidy system. It would actually incentivise efficiency gains in production and supply.

The paper notes that imports of urea, and of the phosphatic (P) and potassic (K) variety of fertilisers have grown five-fold in under a decade, to add up to over 10 million tonnes (MT) per annum, with total nutrient consumption now put at over 26 MT. And the reason in the main for stepped-up imports is the lack of price incentives for setting up fresh capacity in the N and P segments; the entire requirement of K needs to be imported as India does not have viable sources of potash.

The Sharma and Thaker paper estimates fertiliser demand to cross over 40 MT this decade, and projects rising imports sans domestic price and non-price support. Hence the pressing need for price signals and forward looking reforms in the domestic fertiliser sector.

The paper focuses on the need to also produce and deploy 16 plant nutrients that are essential for crop development, in addition to the primary (macro) nutrients, nitrogen, phosphorus and potassium. These include calcium, magnesium, sulphur and micronutrients such as boron, chlorine, copper, iron, manganese, molybdenum and zinc. The nutrient-based subsidy scheme does make possible soil-specific diagnostics, hence the imperative to take its logic forward more systematically.

Source : economictimes.indiatimes.com