The government on Thursday reduced the subsidy on potash by Rs 3.33 per kg for the 2014-15 fiscal, resulting in saving of R900 crore for the exchequer, but said the move would not lead to an increase in retail prices.
The Cabinet Committee on Economic Affairs (CCEA) approved subsidy of P&K (Phosphatic and Potassic) fertilisers for the next fiscal, wherein it recommended constant subsidy rates for all complex fertilisers, barring potash.
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"The Cabinet has decided to reduce the subsidy on potash taking into consideration the fall in international prices. Consequently, this will not put additional burden on farmers. The subsidy on potash will come down to Rs 15.50 per kg from R18.83 per kg earlier," fertiliser secretary Shaktikanta Das said.
The fertiliser ministry had taken approval of the Election Commission to move this proposal before the Cabinet.
The secretary said the total subsidy on fertilisers is likely to come down by R900 crore per annum after the cut in subsidy.
Potash is normally sold in Indian markets at around R16,000 per tonne while phosphate is available at about R22,500 per tonne. MoP (Muriate of Potash) is widely used by farmers apart from urea and Di-Ammonium Phosphate (DAP). MoP is largely imported to meet domestic demand.
According to industry experts, global prices of potash have fallen by about $60-100 per tonne to around $320 per tonne. Except potash, the CCEA kept the subsidy on other major complex fertiliser phosphate at the last year's level as the global prices were stable.
Commenting on the development, PS Gahlaut, MD of Indian Potash (IPL), which imports fertiliser on behalf of the government, said: "The decision to decrease subsidy on potash is appropriate as potash prices in the international market have come down."
During the past one year, the total demand of both potash and phosphate was more than 10 million tonnes.
In April 2010, the government decontrolled the P&K (non-urea) fertilisers by giving freedom to the manufacturers to fix MRP (maximum retail price). The Centre offers a fixed nutrient-based subsidy (NBS) on P&K nutrients to keep domestic rates lower.
However, in case of urea, the MRP is fixed at R5,360 per tonne and the subsidy keeps changing depending on the production cost of domestic urea and the landed cost of imported urea. PTI
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