Without fertilisers, said Normal Borlaug, the world would need two billion people to volunteer to just disappear.
Obviously, it makes sense to increase the supply of fertilisers rather than to look for those volunteers. Sense, however, is in short supply in India’s fertiliser policy , and we have a supply shortage of the stuff. The domestic price of fertiliser has been static since 2002 and the domestic industry has seen virtually no investment for the last decade.
Imports and import prices have been ballooning , jacking up the subsidy bill in tandem: it touched Rs 1 lakh crore in 2008-09 and is about half that this fiscal year, without taking into account below-the-line items such as unpaid dues of fertiliser companies. The subsidy is paid to the fertiliser companies for producing and selling fertiliser to farmers at prices that are below the cost of production. This system — if you understate capacity and overstate costs, you can corner more subsidy — has led to assorted malpractice by the industry.
Industry, in turn, charges the government with discrimination against domestic producers : it is willing to pay a high price for imported fertiliser , while keeping the pricing such that the domestic industry has no incentive to grow. Continuance of this stalemate is untenable. What we need is the political courage to dismantle fertiliser price control.
The government must let the markets determine fertiliser prices. Price decontrol will improve the profitability of domestic companies and encourage them to augment capacity . This will also help rein in the government’s fertiliser subsidy bill. Indigenous capacity is needed to cushion farmers against volatile world prices. The availability of domestic natural gas changes the earlier scenario of feedstock shortage.
Market-linked prices will encourage companies to offer innovative-nutrient combinations to farmers . Free pricing would push up their cost of cultivation. But the extra cost can be factored into the minimum support price for crops. Indian companies should be encouraged to acquire assets overseas, given that India barely has raw materials like rock phosphate and potash deposits.