Sugar-Coating Stats on Urea, How About Reducing the Subsidies

NDA govt should try reducing subsidies on urea and decontrol prices of non-urea fertilisers, writes Amitabh Dubey.

Modi’s predecessors have also been contributing substantially towards reducing the diversion of urea fertiliser. (Photo: The Quint)

At a 21 Feb 2015 rally in Bargarh, Odisha, Prime Minister Narendra Modi accused an array of “unscrupulous forces” of trying to bring down his government. In the rogues’ gallery he included the owners of chemical factories, who he said were angry at his government’s distribution of neem-coated urea, which had ended the profitable diversion of subsidised urea — meant for farmers — to their factories.

Compared with standard urea, neem-coated urea is said to improve productivity and reduce the diversion of subsidised fertiliser to those who can afford to pay market prices. It doesn’t make a meaningful dent in the country’s gigantic fertiliser subsidy bill (see below), but there are some savings.

So what’s the problem? As usual, Modi’s tendency to hog credit for initiatives that his predecessors have substantially contributed to.

For once, Modi managed to acknowledge previous governments in his 15 August 2015 Independence Day speech, in which he identified urea pilferage as an issue. Modi admitted that neem-coating was “an idea propounded by scientists and this idea has not only been brought before my government, it has come before previous governments as well.” But he went on to imply that those governments had done little, and stated that “pilferage of urea cannot be stopped unless we go for cent per cent neem-coating of urea”.

Modi has since taken “cent per cent” credit for the scheme (here and here).

So what are the facts?

One is that state-owned firms like National Fertilizers Limited have been making neem-coated urea for the past decade:

(Infographic: Hardeep Singh/ The Quint)

Another is that the UPA in 2011 raised the ceiling on neem-coated urea production from 20% to 35%, which led to sales of 63 lakh tonnes in 2013-14 – about 28% of total urea production in the country. This represents genuine momentum.

(Infographic: Hardeep Singh/ The Quint)

The figure for 2014-15 isn’t available yet, but neem-coated urea sales for National Fertilizers Limited and KRIBHCO were up 8% and 25% respectively, which appears to be in line with this trend.

The next big push came from the government’s 25 May 2015 decision to make all domestically-produced urea neem-coated, which should lead to a big jump in its output in 2015-16. A recent Department of Fertilizers presentation stated that 77% of domestic urea production already consists of neem-coated urea. If so, Modi should genuinely be able to take credit for a substantial jump in neemification.

Reducing the Subsidy Burden

• At a recent rally, Prime Minister Modi takes credit over distribution of neem-coated urea, a move intended to benefit the farmers.
  
• Centre’s emphasis on production of neem-coated urea meant to reduce diversion of subsidised fertilisers.
  
• Fact check reveals state-owned firms like National Fertilizers Limited have been making neem-coated urea for the past decade.
  
• UPA in 2011 had tried boosting the production from 20% to 35%, a trend which is rising gradually.
  
• What the government needs to do is reduce the subsidy burden and increase the price of urea.
  
  

A recent Department of Fertilizers presentation stated that 77% of domestic urea production already consists of neem-coated urea. (Photo: iStock)

That said, all this rhetoric about neem-coated urea distracts from the government’s failure to raise the highly subsidised price of urea, unchanged for six years at Rs 5,360/tonne — about a third of what it costs to make. The urea subsidy not only adds Rs 50,000 crore to the fiscal deficit but contributes to the rampant overuse of urea (neem-coated or otherwise), harming soil productivity and poisoning our food chain. If the “weak” UPA government was able in February 2010 to decontrol non-urea fertilisers and increase the urea price (by an admittedly token 10%), what’s holding back Modi’s “strong” majority government?

(The writer is a political analyst)

The article originally appeared here as a blog on chunauti.org.

Also read:

Ab Ki Baar, Cut-and-Paste Sarkar: The Case Of Modi’s Make In India

Truth Versus Hype: A Quick Fact Check of Modi’s Achievements