Deregulation of Non-Subsidised Fertilisers

The upcoming union budget is likely to announce major reforms in the fertiliser sector. 

Cause of Less Reforms

• BJP does not have a single party majority in the parliament and is facing strong opposition. 

• Political Situation and Fertiliser Pricing

  • Urea Price Stability
    • The political scenario makes it unlikely for the government to increase the maximum retail price (MRP) of urea.
    • The possibility of bringing urea under the “decontrolled” nutrient-based subsidy (NBS) regime is very low.

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About Non-Subsidised Fertilisers

• Non-subsidized fertilisers are sold at market prices without any government financial assistance or subsidy.
• Farmers purchasing non-subsidized fertilisers pay the full market rate without discounted prices provided by the government.
• The cost of non-subsidized fertilisers can vary based on market conditions, including supply, demand, and international pricing trends.
• Governments often subsidise fertilisers to make them more affordable for farmers, aiming to support agricultural productivity and food security.
• Deregulating non-subsidized fertilisers: It refers to removing government controls or regulations that affect the pricing, distribution, or sale of fertilisers without subsidies. 
• key points about deregulating non-subsidized fertilisers:
  • Market-driven pricing: Without government intervention, prices of non-subsidized fertilizers are determined by market forces such as supply, demand, and competition.
  • Increased competition: Deregulation can lead to a more competitive market as companies may freely enter the market to offer fertilizers, potentially driving down prices through competition.
  • Reduced government expenditure: Governments can save on subsidy costs associated with fertilizers, which may be redirected to other agricultural or developmental initiatives.
  • Impact on farmers: Farmers may experience fluctuations in fertilizer prices depending on market conditions, impacting their cost of production and profitability.
  • Potential benefits: Deregulation can encourage innovation in fertilizer technologies and distribution methods, potentially improving efficiency and availability.

Why Deregulate Non-Subsidised Fertilisers in India?

• Subsidy Burden

  • The Government of India spends a significant amount on fertilizer subsidies (₹ 163,999.80 crore budgeted for 2024-25).
    • However, the subsidy burden is decreasing due to falling global fertilizer prices.

• Slow Registration Process for New Fertilizers

  • Registering a new fertilizer product in India is a slow process, taking an average of 804 days.
  • This is significantly longer compared to other countries (e.g., 30 days in the European Union).
  • The lengthy process hinders the introduction of innovative fertilizers for Indian farmers.
• Faster access to better fertilisers: Deregulating non-subsidised fertilisers would allow companies to bring new products to market quicker, similar to the process for water-soluble fertilisers (WSFs). 
  • This would give Indian farmers access to the latest advancements in crop nutrition.
• Reduced bureaucracy: The current system requires extensive testing and approvals before a new fertiliser can be sold. Deregulation would simplify the process by focusing on basic quality parameters like nutrient content and contaminant limits.

Drawbacks of Deregulation Of Non-Subsidized Fertilizers

• Impact on small farmers: Non subsidized fertilizers are expensive, its deregulation can impact small farmers negatively, leading to a wider gap between large and small scale agriculture. 
• Limited benefit for staple crops: Farmers use fertilizers for staple crops the most. These crops are not very profitable due to which farmers might be hesitant to use expensive fertilizers. 
• Information asymmetry and potential misuse: Deregulation can lead to a wider range of fertilizer options available to farmers. Therefore, there is a need for proper guidance and education to farmers. 

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Recommendations for Improvement

• Government should allow automatic registration for new products meeting:
  • Minimum content of total plant nutrients.
  • Maximum limit of heavy metals and other contaminants.
    • This approach is used by most advanced countries without requiring agronomic or bio-efficacy trials.
• Automatic Registration for Water-Soluble Fertilizers (WSF)
  • In October 2015, the Modi government issued guidelines for WSF commercialisation.
  • WSFs must be 100% water-soluble and can be applied through drip irrigation or spraying.
  • Specifications for WSFs:
    • Minimum 30% total nutrient content (25% primary nutrients NPK).
    • Balance of secondary (S, calcium, magnesium) and micro-nutrients (zinc, boron, manganese, iron, copper, molybdenum).
    • Maximum limits for contaminants (lead, cadmium, arsenic, total chloride, and sodium).
  • Companies can market WSFs meeting these standards after notifying authorities 30 days in advance.

Benefits of the WSF Model for Fertilisers

The WSF model offers several advantages for both farmers and fertiliser companies:

• Faster access to innovative products: Unlike traditional fertilisers, WSFs don’t require lengthy registration processes. Companies can launch new WSF products after informing the government, allowing farmers quicker access to the latest advancements in crop nutrition.
• Improved nutrient uptake: Plants absorb nutrients from WSFs more efficiently compared to traditional field-applied fertilisers. This translates to better crop yields and potentially less fertiliser waste.
• Targeted nutrient delivery: WSFs come in various formulations, allowing farmers to choose fertilisers that meet the specific needs of their crops at different stages of growth.
• Reduced environmental impact: Because of the higher nutrient uptake, WSFs can potentially lead to less fertiliser runoff, which can contribute to water pollution.
• More options for high-value crops: WSFs are particularly well-suited for high-value crops like fruits and vegetables, offering farmers a wider range of fertiliser options to maximise their harvest.

Challenges of the WSF Model

• Higher cost: WSF fertilisers are more expensive than traditional options due to their higher solubility and specific ingredients. 
  • This may limit their adoption by some farmers, particularly those cultivating staple crops with lower profit margins.
• Mixing and application: Unlike liquid fertilisers that come pre-dissolved, WSFs are typically sold in crystal form requiring mixing with water before application.
  • This adds an extra step to the application process for farmers.
• Limited scope: The current proposal only focuses on deregulating non-subsidized fertilizers. Deregulating heavily subsidised fertilisers like urea is a complex political issue that is not addressed by the WSF model.

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