The DAP crisis highlights the futility of price controls – how these are not just an anachronism, but actually work against farmers. Their interests are better served by a regime that induces competition among suppliers to make available more and better fertilisers
The current nationwide shortage of di-ammonium phosphate (DAP) — with police being deployed to handle crowds at some distribution centres for this fertiliser — is symptomatic of a larger problem, involving both short-term planning failure and price controls harking back to an earlier era.
DAP contains 46 per cent phosphorus, a key nutrient that crops require at the early stage of root establishment and development. Farmers apply it at the time of sowing along with seeds. Given an estimated 60 lakh tonnes (lt) of demand during the rabi (winter-spring) season — and much of that consumption happening between mid-October and mid-December — having enough opening stocks is a prudent strategy. But this time, there was hardly 15-16 lt in stock on October 1, as against the recommended 27-30 lt, indicative of poor advance planning. Only 19.7 lt of DAP was imported during April-September (versus 34.5 lt in the same period of 2023). Domestic production, too, has been lower (21.5 lt versus 23.3 lt).
Not surprising, then, that most states are complaining of not receiving or being allocated their required quantity of the fertiliser. Meanwhile, farmers are scrambling for bags as the sowing window for mustard, potato and wheat is narrowing, if not shut — and this, when good monsoon rains as well as crop prices have made them particularly enthusiastic to plant.
The present situation has arisen mainly because of the government allowing fertiliser companies to charge a maximum retail price (MRP) of only Rs 27,000 per tonne for DAP and paying a subsidy concession of Rs 21,911 on top. The two together don’t cover the landed price, bagging, distribution and other costs of imports adding up to Rs 65,000 per tonne. This has made imports, including of raw material and intermediates, unviable.
The resultant shortage has led to long queues and protests by farmers, who are also reportedly paying Rs 250-350 more than the government-fixed MRP of Rs 1,350 per 50-kg bag.
Farmers should, in fact, be discouraged from applying urea, DAP and muriate of potash that contain too much of nitrogen, phosphorus or potassium.
They can be replaced by complexes and water-soluble fertilisers containing less of the same nutrients, but delivering them more efficiently and directly to the crop’s root zone or sprayed to the leaves.
It’s high time to do away with both price controls and product-specific subsidies on fertilisers. Let there be, instead, a flat per-acre payment made every crop season to all farmers conditional upon their purchase of nutrients.
Khmer Times
