The Union government on Wednesday extended by one year a special subsidy of Rs 3,500 per ton on diammonium phosphate, India’s second-most consumed agricultural fertiliser.

The subsidy package lapsed on December 31, 2024. The estimated budget to renew the scheme for a year is Rs 3,850 crore.

Farmers use DAP in the early stages of root establishment and crop development, applying it while planting seeds.

The Centre’s move aims to prevent a rise in farmgate prices due to the recent depreciation of the rupee against the United States dollar, reported The Indian Express. Farmgate price is the price a farmer receives for selling their crops at the farm at the time of harvest.

“[The Union Cabinet] has approved the extension of the one-time special package on diammonium phosphate (DAP) till December 31, 2025,” Union Minister for Rural Development, Agriculture and Farmers Welfare Shivraj Singh Chouhan said. “The aim is to ensure that DAP remains affordable for farmers.”

To keep fertiliser prices in check, the National Democratic Alliance government has effectively frozen the maximum retail prices of all non-urea fertilisers despite them being “decontrolled” on paper.

This is unlike urea, which has had a fixed retail price of Rs 266.50 for a 45-kilogram bag since November 2012, according to The Indian Express.

Companies are not allowed to charge more than Rs 1,350 for a 50-kilogram bag of DAP, with maximum retail prices set at Rs 1,300 for the ‘20:20:0:13’ variant, Rs 1,470 for the ‘12:32:16:0’ and ‘10:26:26:0’ variants, and Rs 1,500-1,600 for muriate of potash, or potassium chloride, another non-urea fertiliser.

The rupee’s sharp decline has made it challenging to maintain informal price caps on fertilisers. For example, the landed import price of DAP has risen to Rs 54,160 per tonne, up from Rs 52,960 three months ago, due to the rupee’s depreciation from 83.8 to 85.7 against the dollar.

The landed cost of an imported product is the total cost of getting the product from a factory to a customer, including shipping, logistics and customs costs.

Fertiliser companies are receiving a subsidy of Rs 21,911 per tonne on DAP, plus an extended Rs 3,500 “special package” concession, bringing the total realisation to Rs 52,411 per tonne. This amount falls short of covering the landed import cost.

In October, a nationwide shortage of DAP had triggered panic among farmers in Haryana. This has led to the police being deployed at the distribution centres of the fertiliser to manage the crowds.

The shortage of DAP was attributed to higher global prices, coupled with the government setting a low minimum retail price in India. Additionally, lower subsidy concessions have made imports unviable.

Due to this, DAP bags were being sold in the presence of the police at Gohana in Sonipat district and Narnaul in Mahendragarh, reported The Indian Express.

Pradhan Mantri Fasal Bima Yojana continues

On Wednesday, the Union Cabinet approved the continuation of the Pradhan Mantri Fasal Bima Yojana and Restructured Weather-Based Crop Insurance Scheme until 2025-’26 with a budget of Rs 69,515.71 crore to provide risk coverage for farmers.

The Cabinet also approved the establishment of the Fund for Innovation and Technology, with an allocation of Rs 824.77 crore to enhance insurance scheme technologies.

Chouhan said that the Cabinet had also approved the signing of a Memorandum of Understanding on the export of non-Basmati white rice between India’s Ministry of Cooperation of India and the Ministry of Trade of Indonesia.

The agreement will involve the sale of one million metric tonnes of rice to Indonesia, determined by production and international prices.