{"id":44320,"date":"2025-01-02T11:17:08","date_gmt":"2025-01-02T05:47:08","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=44320"},"modified":"2025-05-06T10:20:04","modified_gmt":"2025-05-06T04:50:04","slug":"government-extends-dap-subsidy-to-control-fertilizer-prices","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/government-extends-dap-subsidy-to-control-fertilizer-prices\/","title":{"rendered":"Government Extends DAP Subsidy to Control Fertilizer Prices"},"content":{"rendered":"<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>Key Decision of the Union Cabinet<\/li>\n<li>Fertilizer Price Dynamics<\/li>\n<li>Challenges for the Fertilizer Industry<\/li>\n<li>Government\u2019s Strategy<\/li>\n<li>Future Outlook<\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>Cabinet approves extension of One-time Special Package on Di-Ammonium Phosphate (DAP) beyond the NBS subsidy for the period from 01.01.2025 till further orders to ensure sustainable availability of DAP at affordable prices to the farmers.<\/li>\n<\/ul>\n<h2><strong>Key Decision of the Union Cabinet:<\/strong><\/h2>\n<ul>\n<li><strong>Extension of subsidy:<\/strong> The Centre has extended the Rs 3,500 per tonne special subsidy on di-ammonium phosphate (DAP) for one more year, effective from January 1, 2025, to December 31, 2025.<\/li>\n<li><strong>Objective:<\/strong> The decision aims to stabilize farmgate prices and shield farmers from price volatility caused by the rupee&#8217;s depreciation against the US dollar.<\/li>\n<\/ul>\n<h2><strong>Fertilizer Price Dynamics:<\/strong><\/h2>\n<ul>\n<li><strong>MRP caps on fertilizers:<\/strong>\n<ul>\n<li>The Modi government has informally frozen the maximum retail price (MRP) of non-urea fertilizers despite their decontrolled status.<\/li>\n<li><strong>Current MRPs:<\/strong>\n<ul>\n<li><strong>DAP: <\/strong>Rs 1,350 per 50-kg bag<\/li>\n<li><strong>Complex fertilizers: <\/strong>Rs 1,300 to Rs 1,600 per bag, depending on the composition.<\/li>\n<\/ul>\n<\/li>\n<li>The government\u2019s subsidy on DAP is Rs 21,911 per tonne, along with the Rs 3,500 special concession.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact of currency depreciation:<\/strong>\n<ul>\n<li>The rupee\u2019s fall against the dollar has raised the cost of imported fertilizers.<\/li>\n<li><strong>Current import costs:<\/strong>\n<ul>\n<li><strong>Landed price of DAP: <\/strong>Rs 54,160 per tonne, up from Rs 52,960 three months ago.<\/li>\n<li>Total cost after additional expenses (e.g., customs, handling, and dealer margins): Rs 65,000 per tonne.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Challenges for the Fertilizer Industry:<\/strong><\/h2>\n<ul>\n<li><strong>Viability concerns:<\/strong>\n<ul>\n<li>Fertilizer companies face unviable import economics unless:\n<ul>\n<li>The government increases subsidies.<\/li>\n<li>Companies are allowed to revise MRPs upward.<\/li>\n<\/ul>\n<\/li>\n<li>Even with the extended subsidy, companies estimate a shortfall of Rs 1,500 per tonne due to currency depreciation.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Stock levels:<\/strong>\n<ul>\n<li>Current stocks of DAP (9.2 lakh tonnes) and complex fertilizers (23.7 lakh tonnes) are below last year\u2019s levels.<\/li>\n<li>Insufficient imports may lead to supply challenges for the next kharif season (June-July 2025).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Government\u2019s Strategy:<\/strong><\/h2>\n<ul>\n<li><strong>Compensation for imports:<\/strong>\n<ul>\n<li>On September 20, 2024, the government approved compensation for DAP imports above a benchmark landed price of $559.71 per tonne.<\/li>\n<li>However, these calculations were based on an exchange rate of Rs 83.23 per dollar, which has since fallen below Rs 85.7.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Fiscal implications:<\/strong>\n<ul>\n<li>The extended subsidy will cost the government an additional Rs 6,475 crore.<\/li>\n<li>Any MRP hike is expected to have minimal political implications, given that major agriculture states are not going to polls soon and the current DAP consumption season is over.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Future Outlook:<\/strong><\/h2>\n<ul>\n<li><strong>Immediate priority:<\/strong> Ensuring adequate fertilizer availability for the kharif season by securing imports of both finished fertilizers and raw materials.<\/li>\n<li>The government\u2019s ability to balance fiscal constraints, industry viability, and farmer affordability will be critical in the coming months.<\/li>\n<\/ul>\n<hr \/>\n<h3><strong>Q.1. What is nutrient based subsidy (NBS)?<\/strong><\/h3>\n<p>NBS is a government policy that provides subsidies for fertilizers based on their nutrient content. The policy was introduced in 2010 to improve agricultural productivity, ensure food security, and balance fertilizer use.<\/p>\n<h3><strong>Q.2. What is Di-Ammonium Phosphate (DAP)?<\/strong><\/h3>\n<p>DAP is a fertilizer that is made from a reaction of phosphoric acid and ammonia and is a primary source of nitrogen and phosphorus for plants. It is the most widely used phosphorus fertilizer in the world.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/india\/govt-extends-special-subsidy-on-dap-weakening-rupee-upsets-calculations-9755375\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cabinet approves extension of One-time Special Package on DAP beyond the NBS subsidy for the period from 01.01.2025 till further orders to ensure sustainable availability of DAP at affordable prices to the farmers<\/p>\n","protected":false},"author":5,"featured_media":44321,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-44320","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/44320","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=44320"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/44320\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/44321"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=44320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=44320"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=44320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}