Primus Partners’ Whitepaper highlights the volatility and challenges with the fertilizer subsidy

 The whitepaper sheds light on the significance of the fertilizer subsidy, its inherent volatility, and the imperative need for effective policies to address the challenges it poses.

New Delhi based Primus Partners Pvt. Ltd. (Primus) – a distinguished pioneer in the realm of management consulting services unveiled an insightful whitepaper on the chemicals industry, with a specific emphasis on the fertilizer subsidy and potential areas of growth. The whitepaper sheds light on the significance of the fertilizer subsidy, its inherent volatility, and the imperative need for effective policies to address the challenges it poses.

As per the whitepaper, the fertilizer subsidy constitutes a substantial portion with an annual allocation of approximately Rs 1.75 lakh crore, accounting for approximately 20% of all schemes in the 2023-24 budget. This allocation is divided into two major components: Rs 1.31 lakh crore for urea subsidy and Rs 44,000 crore for nutrient-based subsidy. However, the fertilizer subsidy is often seen to be unpredictable, with the revised estimate for 2022-23 surpassing the budgeted amount by more than twofold. This volatility primarily stems from fluctuations in international gas and urea prices.

The Fertilizer subsidy has an important role in overall food production of India and management of farm input for the farmers. Many issues with the subsidy have been identified since long time. There has been a deadlock between conflicting and noble goals, which needs to be resolved.

“Our whitepaper highlights the reasons for deadlock that is preventing improvement on fertilizer subsidy policy and mechanism. We believe that viable alternatives need to be created for farmers to move away from harmful overuse of urea. By improving subsidy policies and mechanisms and embracing technological advancements and tailored farming techniques, we can unlock new avenues of growth and sustainability in the fertilizer industry.” said Anurag Singh, Managing Director, Primus Partners.

The whitepaper proposes two primary approaches to tackle the subsidy deadlock. Firstly, there is a need to improve subsidy policies and mechanisms, which will be explored in subsequent discussions. Secondly, reducing urea usage by fostering viable alternatives is of paramount importance. Technological advancements in agriculture, such as nano urea, precision agriculture, drone usage, GIS applications, and improved farming techniques, exhibit promising potential in achieving this objective. Developing a tailored bundle of technologies and practices specific to crop clusters, such as the potato cluster in the Firozabad area, will help prioritize areas with the highest potential for reducing urea usage.

To facilitate the transition to alternative practices, economic studies must be conducted in each crop cluster to assess the impact on farm inputs, investments, cash flow, farmer efforts, and output quality. Identifying the necessary support and cost-effective initiatives for farmers to make the switch is essential. Additionally, the development of value chains for the proposed solutions, accompanied by special schemes, will enhance the economic viability of key participants.

As the chemical industry plays a vital role in India’s economic growth and agricultural development, Primus Partners remains committed to providing comprehensive insights and strategic recommendations to industry stakeholders.  By advocating for effective policies, innovative approaches, and the adoption of technological advancements and tailored farming techniques, we can create a more sustainable and prosperous future for the fertilizer industry.

 The whitepaper sheds light on the significance