Agriculture Policy

How DAP is Subsidised and Priced?

DAP or di-ammonium phosphate is the second most used fertiliser in India. In 2020-21, 11.91 million tonnes of it was sold. It is applied before or at the time of sowing.  It has 46 percent phosphorus and 18 percent nitrogen. Phosphorus helps in root growth and plant development. Without phosphorus plants cannot grow to their normal size or will take too long to mature.  The subsidy on DAP was Rs 10,231 per tonne or Rs 511.50 a bag of 50 kg. It was being sold for Rs 24,000 a tonne or Rs 1,200 a bag. This was when landed prices were below $400 a tonne or Rs 29,000 till October. With 5 percent customs duty and Rs 3,500 other charges the total cost was Rs 34,000 a tonne. After subsidy of Rs 10,231, it was being sold for Rs 24,000 a tonne.

But global prices started firming up thereafter because of the surge in commodity prices. The average import cost of DAP at Indian ports rose to $570 a tonne. So companies jacked up prices to Rs 1,900 a bag. The government had kept the nutrient-based subsidy rates unchanged for this year when it notified them on 9 April: Rs 18,789 a tonne for nitrogen, Rs 10,116 for potassium and Rs 14,888 for phosphorus. The  Department of Fertiliser also now notified a higher subsidy for phosphorus: Rs 45,323 a tonne. So the subsidy on DAP will be Rs 20,849 (for 46% phosphorus content) and Rs 3,382 for 18 percent nitrogen or Rs 24,231 a tonne. This works out to Rs 1,212 a bag of 50 kg againt Rs 511.50 earlier. The extra Rs 700 subsidy will ensure that the retail price remains unchanged.

The price of DAP and other complex fertilisers is decontrolled, which means the subsidy is fixed while the retail price is not. All these fertilisers have nutrient-based subsidy or subsidy as per their nutrient content (nitrogen, phosphorus and  potassium).  This is unlike urea, where the retail price is fixed at Rs 5,378 per bag of 45 kg but the subsidy is open-ended.

(This is based on an article in the Indian Express)

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