Indian govt reveals massive ferts subsidy bill

04 July 2008 14:43  [Source: ICIS news]

India protects local farmersLONDON (ICIS news)--The Indian government has taken the unusual step of publishing its fertilizer subsidy bill, which is expected to reach nearly Rs 1,200bn ($28bn) this year, in leading local papers, sources in the country said on Friday.

The Department of Fertilizers (DOF) took out an advertisement in several prominent Indian newspapers detailing the scale of its subsidy system.

It was understood to be the first time the government had taken this step and comes at a time of record high global fertilizer prices.

According to the advertisement, local Indian producers were selling urea at around $302/tonne and imported urea was priced at $722/tonne.

However, the Indian government subsided the price to such an extent that urea was made available to farmers at around $112/tonne, over $600/tonne less than the import price.

Indian urea consumption is normally 20m-25m tonnes/year, of which around 5m tonnes is usually imported.

The subsidy for diammonium phosphate (DAP) was even more substantial. Despite domestically produced DAP and imported DAP priced on a par at approximately $1,357/tonne, the farmer price was reported at around $217/tonne, over $1,000/tonne lower.

Large subsidies were also applicable on muriate of potash (MOP), super phosphate (SSP), and nitrogen, phosphate and potash (NPK) fertilizers.

According to the advertisement, the government’s total fertilizer subsidy bill for 2007-2008 was around $9bn, and was expected to rise to $28bn for 2008-2009.

Local market sources said the publication was made for two reasons. Firstly, to show farmers that despite record high fertilizer prices internationally, local farmer prices were not rising.

Secondly, by stating official farmer prices the ability of retailers to exploit any shortages by hiking prices was limited.

However, there was speculation in the market that the advertisement could possibly pave the way for a tax hike by the government or a price rise for fertilizers at the farmer level.

($1 = €0.64, $1 = Rs 43.16)

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By: Carl Roache
+44 20 8652 3214



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