November 12, 2023
Drastic Reduction in Fertilizer Subsidies: AIKS Expresses Concern

THE All India Kisan Sabha (AIKS), in a statement issued on November 8, has expressed its profound concern and disappointment over the recent decision by the Government of India to significantly reduce subsidies on fertilizers under the NBS scheme, as announced in a notification dated October 26, 2023. This abrupt and severe cut in fertilizer subsidies comes at a critical time when farmers across India are gearing up for the Rabi crop season.

In the wake of the fertilizer crisis, it seemed that the worst was behind us, but the government has acted swiftly to reverse the crisis response policies. The AIKS notes that the subsidies for fertilizers, particularly for phosphates and potash, have been drastically slashed, aggravating the plight of Indian farmers. This reduction in subsidies has come at a time when international prices for these vital fertilizers have soared, leaving Indian agriculture more vulnerable to market fluctuations.

The data reveals that, when accounting for the drastic depreciation of the exchange rate, the subsidy on phosphates in October 2023 is only 9 per cent higher than the subsidy rate in June 2020, despite international prices for rock phosphate being approximately 4.6 times higher than those in June 2020. The situation is even more dire for potash, where the subsidy has been slashed to a mere 23 per cent of the pre-crisis level in nominal rupee terms, or approximately 80 per cent when considering exchange rate depreciation. This is in stark contrast to the fact that international prices for potassium chloride are about 1.75 times higher than those in June 2020. These drastic subsidy cuts will inevitably lead to a sharp increase in fertilizer prices in India.

India's food security is deeply interconnected with the use of chemical fertilizers, and the country's reliance on international markets for these crucial inputs has been exacerbated by decades of neoliberal policies. The AIKS is deeply disappointed by the ad-hoc, haphazard, and delayed response of the Indian government in addressing the fertilizer crisis, which proved grossly inadequate in mitigating the inflationary impact on domestic prices and ensuring an adequate supply of fertilizers.

It is evident that no substantial lessons have been learned from this crisis, and the Nutrient Based Subsidy (NBS) regime, which decontrolled prices of fertilizers other than urea while continuing to subsidise certain fertilizer companies, remains unchanged. Over the past three years, farmers have borne the brunt of increasing fertilizer prices, rationed provisioning of fertilizers, rampant black marketing, and various forms of malpractices at the hands of fertilizer companies and dealers. The recent severe reduction in subsidies, as announced by the government, paints a bleak picture for the future of Indian farmers who are already grappling with numerous challenges.

The All India Kisan Sabha urges the government to withdraw its decision and take immediate measures to address the concerns of farmers, ensuring that they receive the necessary support and subsidies to sustain their livelihoods and secure the nation's food security.