Karnataka   

Hike in global prices led to fertilizer crisis? Business sense

The spate of farmer suicides in the State in recent weeks has brought to the fore the serious crisis caused by the shortage of fertilizers. The State Government has come under attack for its handling of the crisis, which has assumed unprecedented proportions. Chastened by the criticism, the State has, in turn, blamed the Union Government for the shortage of fertilizers.

The State Government has alleged that the Union Government has not released sufficient quantities of fertilizers. In turn, the Congress has alleged that the State Government has bungled in dealing with the situation. It is now clear that the crisis has affected every major State in the country.

Fundamentally, the problem of shortage is related to the spiralling price of fertilizers in the international market. To make matters worse, the domestic production has remained stagnant in the last few years, making the country heavily import-dependent.

Needless to say, the sharp increase in prices, fuelled in a significant measure by escalating price of crude oil and gas prices in the global market, has had the effect of choking supplies. Moreover, the sharp rise in prices of feedstock, notably naphtha, has rendered the operations of several fertilizer producers unviable. Fertilizer producers allege that the delayed payment of subsidies due to them has hit them hard at a time when costs have escalated beyond control.

The price increase, coupled with the growing dependence on imports, lies at the heart of the current crisis. Last, year, the country imported 69.28 lakh tonnes of urea, while domestic production was almost 200 lakh tonnes. In effect, imports accounted for about one-fourth the availability of urea in the country. In contrast, in 2004-05, imports accounted for 3 per cent of the availability. In fact, domestic production of urea has fallen by almost 5 lakh tonnes since then, making the country more dependent on imports.

A similar tendency is observed in the case of supplies of di-ammonium phosphate (DAP).

The average landed price of DAP, which was $174 a tonne in 2001-02, increased sharply to $644 a tonne is 2007-08. Currently, it costs $1,300 a tonne, inclusive of freight. The domestic production of DAP has fallen by almost 20 per cent since 2004-05, while imports have increased more than four-fold in this period.

The ongoing controversy in the State over who — the Centre or the States — are responsible for the crisis misses the critical issue of what has triggered the crisis. In particular, it misses the policy-related factors, especially those which have made the Indian farmer heavily dependent on external sources of supplies.

More than three-fourths of the land holdings in Karnataka are cultivated in the ongoing kharif season. Farmers need fertilizers as the rains start.

This explains the panic caused by the shortage of the critical input.

Moreover, the State has only one manufacturer of urea and complex fertilizers, the privately owned Mangalore Chemical Fertilizer (MCF), which makes it dependent on supplies from the rest of the country for meeting its requirements. Karnataka is heavily dependent on other private and State-run manufacturers located elsewhere such as FACT, Coramandal Fertilizers, IFFCO and Kribhco.

It is very unlikely that the Centre would not have been unaware of the looming crisis, especially when prices were on an upswing in the last few months.

The fact that it is better placed in terms of financial resources as well as the ability to marshal supplies from private, cooperative and public sector units across the country also implies that it ought to have done more to ensure that farmers across the country were not left stranded just when they needed the key input.

V. SRIDHAR

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Karnataka has surplus fertilizer stocks, claims Deve Gowda
Processions taken out in many taluks
73 p.c. polling in Uttara Kannada
Hike in global prices led to fertilizer crisis? Business sense
Free phone-in career guidance programme
Gram panchayat office damaged
Gulbarga gets child helpline
Farmers demand jobs under NREGS
Madhesis defiant
Over 1,000 farmers get fertilizers
Protest against Hogenakkal project
Woman duped
Prohibitory orders

Copyright © 2008, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu