The fertiliser subsidy bill is expected to be over Rs 2 lakh crore for this financial year, while the same stood at Rs 1.62 lakh crore in the previous fiscal. CNBC-TV18 speaks to fertlisers secretary Arun Singhal about the government's roadmap when it comes to the subsidy, on nano fertilisers, securing inputs and gas supplies and more.
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On fertiliser subsidy
Q: View on fertiliser subsidy amount for FY23 which has ballooned to over 2 lakh crore? Is this a challenge?
A: I agree with you because of geopolitical considerations in the world and various factors, the subsidy amount has gone up. It is always a challenge for the government to find funds. But it's a question of priorities, if farmers occupy the highest priority for the government, then the government will ensure that funds are made available. That has been happening, so far even though prices have gone up internationally, the government has chosen to increase the subsidy burden, and not to burden farmers.
As I said, the government is fully committed to ensure that sufficient adequate supply of fertiliser is available to farmers and at reasonable rates. The commitment is there and therefore that will translate into action on the funds front also. So I don't foresee any problems.
We struggle all the time to reduce the subsidy burden, we try various things such as improving the gas supply, the prices at which we purchase gas, or diversifying our sources of supply of fertiliser. So we keep on doing that we keep on trying to reduce the subsidy burden. But whatever it takes will be provided by the government because the government is fully committed that farmers should get fertilisers at reasonable rates.
Q: Is your assessment of subsidy for FY23 final or we can see more changes/supplementary demands etc?
A: Supplementary demands have already been placed before the Parliament. However, as I said, if there is a further requirement of funds, we will be going to the Finance Ministry, and we have been assured that whatever is required would be provided. It is very difficult to give a number right now because the prices of gas will fluctuate. We don't know what the prices are going to be in January, February and March. Urea, as you know, largely depends on the prices of gas. So we don't really know how much the subsidy burden is going to be. Similarly, the prices of potash and the prices of phosphatic fertilisers also keep on changing. So, it is difficult to put a number to it. But as I said ,whatever it takes will provide that.
Q: Industry analysts expect the FY24 subsidy number to be meaningfully lower? Can you give us any indicative number?
A: We certainly hope so, this subsidy burden is quite high. As I said, we are working on several methods to reduce the subsidy burden, several reforms are being talked about. But even if we leave all that aside, the prices of di-ammonium phosphate (DAP) have started cooling down. They had gone up to $920 per tonne now they have come down to $720-730 per tonne. Similarly, the prices of urea have come down in the international market. Now we are getting in our tenders, we are getting a rate of $578 per tonne. This rate also had gone up to $1,000 per tonne. So, prices are coming down.
That applies to phosphoric acid, rock phosphate, everything. So we do hope next year there will be a lesser subsidy burden. The other important thing of course, is that we have nano urea, now, which is part of the supply chain. So next year, the manufacturing capacity of nano urea will go up. We plan to make about 17 crore bottles of nano urea, which are equivalent to roughly 75 lakh metric tonne of urea. So that also would contribute to reducing the subsidy burden. We are hopeful for a substantial reduction.
On Nano Fertiliser
Q: What is the nano fertiliser opportunity? Urea has been rolled out. DAP is next. How does this work? Markets are also looking at this very keenly, because the amount of subsidy you need to pay on these will come down quite a bit?
A: That's right. You see when you sprinkle fertiliser in a field, there's a lot of wastage, first of all, lots of it gets evaporated, it doesn't go to the plant at all. Whatever goes to the plant, only a part of it is absorbed by it and part of it is wasted. So the efficiency of using a fertiliser in the conventional manner is very, very low. On the other end, when you convert that into a nano fertiliser, whereby the surface area goes up many many times and this is used as a foliar spray on leaves of the plant, then it is absorbed directly by the plant from the leaves. So the efficiency of using nitrogen goes up many many fold.
In very broad terms, I am not being very technically scientific here — one bag of urea will translate into 100 bottles of nano urea and each bottle of nano urea would be as effective as a bag of urea. So, you can imagine the efficiency goes up about 100 times. Now, if that happens, what is estimated by scientists is that about two-thirds of the entire consumption of urea can be replaced by nano urea. We are talking about 350 lakh metric tonne of urea being consumed in the country today. So, if out of that, 200 lakh metric tonne can be replaced by nano urea, for which we don't really need to provide any subsidy at all obviously, there is going to be a significant saving in terms of taxpayers funds which are being used.
Secondly, from the environmental point of view, it's very, very beneficial, you can imagine we have to manufacture 100 times less urea. So, therefore, the environmental impact would be much lower, and the problem of leaching and contamination of groundwater and degradation of soil also be held to a large extent. So, it's a wonderful strategy to go forward. I am glad to tell you that on the same lines now, nano DAP also has been developed by IFFCO and Coromandel. They have applied to the agriculture department for registration.
Q: By the way, are you close to giving an approval for this nano- DAP?
A: Yes, we are expecting it. As I said, by the next kharif season, we should have it. It’s been evaluated by a committee of experts in the agriculture ministry and thereby law satisfied field trials had been carried out earlier. So it's close to being approved now. Once it is approved will to be to be out in the market.
On securing inputs and gas supplies
Q: On input side of things — prices of potash, ammonia, phosphoric acid etc have been very volatile. In terms of securing sourcing for these commodities because we have seen a fair bit of geopolitical turmoil as well. What is the government's strategy going to look like?
A: Our strategy is based on diversifying our sources and going for long-term MoUs with countries or companies. These MoUs are signed between companies of our country and their country, but we do facilitate them. So if we were to look at potash for instance, the yearly requirement is 40 lakh metric tonne against that we have an agreement — long-term MOU of 15 lakh metric tonne in Canada now, Canpotex, around 7 lakh metric tonne with Israel, 2.75 lakh metric tonne with Jordan, and 1.05 lakh metric tonne with Germany.
Now, we have signed 7 lakh metric tonne with Russia, if you add all this it comes to around 35 lakh metric tonne. So, against the requirement of 40 lakh metric tonne, we already have long-term MoUs for 35 lakh metric tonne and then of course, we go into market and purchase wherever it is available. Similarly, if you look at DAP or NPK or rock phosphate, phosphoric acid, we do have long-term contracts with many countries. So, we diversify our sources and go for long-term MOUs, which give us a lot of comfort. They give a lot of comfort to the supply and company also because demand is assured. That is the strategy we are following. It is working well, so far.
Q: The other is gas supplies — the government has prioritized the fertilizer sector as one of the priority areas for gas. There were some issues with availability other sectors, of course, falling short of their requirements any thoughts you can offer?
A: Gas is extremely, extremely critical for the fertiliser sector, if you look at the price of urea 85 to 90 percent of the total price of urea is the price of gas only. So, it entirely depends on the price of gas. There has been a lot of volatility in the prices of gas also. Some of the long-term gas which was coming from Gazprom and sources in Russia has stopped coming because of this conflict which is going on. So gas prices and availability has been impacted.
We normally use three types of gas. The first is domestic gas, which is produced within the country that normally is the cheapest. Then we have long-term contracts for supply of gas, this is higher in cost. And finally there spot LNG, which is normally the highest in cost. It varies quite a lot from $2 to $67. There is a lot of volatility. But today it is coming at a higher price than even the long-term contracts. So the share of spot LNG has gone up in our portfolio because long-term supply of gas has been impacted. So spot gas has gone up in our portfolio to about 25-26 percent and that is an area in which we need to make savings so we are working very hard on this.