Govt Extends Special Subsidy on DAP

2 Jan 2025

Govt Extends Special Subsidy on DAP

The special subsidy of ₹3,500 per tonne on Di-Ammonium Phosphate (DAP), originally set to end on December 31, 2024, has been extended until December 31, 2025.

  • To control farmgate prices of DAP, India’s second most-consumed fertiliser, despite the recent depreciation of the rupee.

Diammonium phosphate (DAP)

  • It is made from two common macronutrients phosphate and nitrogen.
  • The composition of DAP is 18% Nitrogen and P2O5 46%. 
  • It is popular because of its relatively highest concentration of phosphate and nitrogen content coupled with its excellent physical properties.
  • It  is an excellent source of P and N for plant nutrition.

Enroll now for UPSC Online Course

Import Cost of DAP

  • Fiscal Cost: The additional ₹3,500 per tonne subsidy will cost the government approximately ₹6,475 crore.
  • Challenges Due to Falling Rupee: The rupee’s depreciation from ₹83.8/USD to ₹85.7/USD has increased the landed cost of DAP imports.
    • Fertiliser companies’ gross realisation of ₹52,411 per tonne (MRP + subsidies) is still below the landed cost of ₹54,160.
  • Compensation for Imports: In September 2024, the government approved full compensation for DAP imports above $559.71 per tonne for shipments arriving between September 1, 2024, and March 31, 2025.
  • Exchange rate considered for compensation: ₹83.23/USD (now outdated due to further depreciation).

Industry Concerns

  • Fertiliser Stock Levels and Supply Concern: Current Stock Levels (as of mid-December 2024) of DAP is  9.2 lakh tonnes (down from 13 lakh tonnes year-on-year).
  • Complex fertilisers stock decline  : 23.7 lakh tonnes (down from 32.3 lakh tonnes year-on-year).
  • Industry demand: Companies suggest the need for either increased subsidies to match rising costs, or permission to raise the MRP of DAP by at least ₹1,500 per tonne.

Upcoming Challenges

  • Need of Import: Adequate imports of both finished fertilisers and raw materials are required to ensure sufficient availability for the kharif season (June-July 2025).
    • Without imports, there could be supply disruptions, as stocks are already below year-ago levels.
  • Seasonal Impact: The current consumption season (rabi crop) is over, so any MRP increase would have minimal immediate impact.
    • The price rise will impact the input cost in next kharif season.

Check Out UPSC CSE Books From PW Store

Way Forward

  • Increase Subsidies Temporarily: To offset the rising costs due to rupee depreciation, the government can provide additional short-term subsidies to ensure affordability for farmers.
  • Encourage Domestic Production: Promote domestic manufacturing of DAP and intermediates to reduce dependency on imports.
  • Exchange Rate Hedging: Fertiliser companies could hedge against currency fluctuations to mitigate risks.
  • Alternative Fertilisers: Promote balanced fertilisation using alternative and indigenous fertilisers like bio-fertilisers to reduce reliance on DAP.
  • Strengthen Stock Management: Maintain higher buffer stocks by ensuring timely imports of both fertilisers and raw materials.
  • Technology & R&D: Invest in research for cost-effective fertiliser formulations and sustainable farming practices. For Example , introducing Nano-DAP at affordable prices.
Additional Reading: Nano DAP

Archive Calendar

Mon Tue Wed Thu Fri Sat Sun
 123456
78910111213
14151617181920
21222324252627
28293031  

by month

SRIJAN MAINS

Need help preparing for UPSC or State PSCs?

Connect with our experts to get free counselling & start preparing

Aiming for UPSC?

Download Our App

      
Quick Revise Now !
AVAILABLE FOR DOWNLOAD SOON
UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध
Quick Revise Now !
UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

<div class="new-fform">






    </div>

    Subscribe our Newsletter
    Sign up now for our exclusive newsletter and be the first to know about our latest Initiatives, Quality Content, and much more.
    *Promise! We won't spam you.
    Yes! I want to Subscribe.