Government to reimburse fertilizer companies for increased production expenses

Mansoukh Mandaviya

Without increasing the subsidy component, the Union Fertilizer Department will develop a method to reimburse industry for the higher production cost it would incur in producing fertilizer.

Mansukh Mandaviya, the Union Minister for Chemicals and Fertilizers, said this during a meeting in New Delhi to discuss fertilizer supply for the rabi season, sources said.

Subsidies will not be increased, but a method will be developed to bridge the gap between rising production costs and maintaining DAP’s current selling price, he added.

The government, for its part, does not envisage any support for the manufacture of NPK complex fertilizers (nitrogen, phosphorus, potassium), likely to affect the nutritional balance of crops, he added.

The minister also called on fertilizer manufacturers to increase production to ensure sufficient supplies throughout the next rabi season. Ahead of the rabi’s planting season next month, the government asked industry, including public sector companies, to normalize supplies of diammonium phosphate (DAP) by increasing production and imports.

Uncertain future

The fertilizer companies are crossing their fingers that there is no clear strategy on how the compensation system works. Their concerns stem from the increase in logistics and transport expenses caused by the inability to move shipments due to the lack of ships and containers. Shipping prices almost doubled, leading to increased production expenses.

Demand for fertilizer is strong in the United States and Brazil, with dramatic increases in the area planted to corn and soybeans and record prices for both crops.

As a result, demand for fertilizer in these countries has remained strong, limiting global supply and pushing fertilizer prices to decade-high levels. With indigenous resources limited, India’s fertilizer industry depends on imports to meet demand.

Farmers in the northern and central states expect a record harvest of wheat, mustard, potatoes, onions, sugarcane and corn, which require more fertilizer, after having difficulties obtaining fertilizer last season due to the logistical limitations of Covid.

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