New Delhi: The government is unlikely to raise subsidy further this fiscal on imported fertilisers, especially DAP and MoP, despite industry demand for it on the grounds that high global prices and the weak rupee have made shipments costlier.
The fertiliser ministry does not want to hike the subsidy by raising the benchmark price under the current policy, sources said.
It wants to wait and watch the situation as it feels that global prices could come down on possible demand fall following the euro-zone crisis and weak economic outlook in the US, they added.
"Any decision on revision in the benchmark prices for DAP and MoP would be taken after March next year after assessing the global price situation," said a source.
Under the Nutrient Based Subsidy (NBS) policy launched in 2010, the government subsidises imported phosphatic and potassium fertilisers based on the average benchmark rate to insulate domestic firms from high global prices. It keeps domestic rates affordable for farmers.
The government is giving a subsidy of Rs 19,763 per tone on DAP and Rs 16,054 per tonne on MoP under the NBS policy this fiscal.
In 2011-12, the fertiliser ministry has raised the benchmark price of di-ammonium phosphate (DAP) and muriate of potash (MoP) to USD 612 per tonne and USD 420 per tonne, respectively.
However, the industry has sought an upward revision in the benchmark price as input costs have increased in the wake of rise in global prices and the weakening of the rupee.
Sources said the global prices of the crop nutrients could come under pressure with the likely increase in production of DAP and MoP in China, one of the world's largest consumers of fertilisers.
They added that the ministry feels there is no case for hike in the benchmark price at present because domestic firms have already contracted DAP and MoP supplies till March.
Experts are of the opinion that the global prices of DAP and MoP would remain weak in the medium term due to uncertain global economic situation. However, in the long term, global prices of these two fertilisers are expected to be bullish.
India, which imports its entire requirement of MoP, has contracted 5.5 million tonnes this fiscal for a price of USD 470 a tonne in the second and third quarters and at USD 530 a tonne in the last quarter.
In the case of DAP, the country has contracted around 2.5 million tonnes for USD 677 per tonne till the last quarter of 2011-12 fiscal.
The country imports 90 percent of its DAP requirement. It imported 7.41 million tonne DAP and 4.5 million tonne MOP in 2010-11.
First Published: Tuesday, December 6, 2011, 18:54