EVEN as the south-west monsoon set in early this year, farmers across India are facing an acute shortage of fertilisers. While preparations for the Kharif season have begun, farmers in many states have not been able to start sowing operations because of a shortage of fertilisers.

India’s fertiliser sector crisis promises to turn messier over the coming months. The fertiliser subsidy bill has bloated, prices have hit the ceiling, there is an acute scarcity of various ingredients including feedstock such as natural gas and naphtha, and producers are reluctant to enhance production as the government has failed to clear their dues.

The result: farmers across the country are agitated and have started protesting against the shortage. In Karnataka, a farmer was killed in police firing, embarrassing the newly-sworn in Bharatiya Janata Party (BJP) government, which confronted its first crisis days after taking over.

In Maharashtra, which has received barely a fifth of its requirements, thousands of farmers are demanding fertilisers, marching to local government offices. Chief ministers of Maharashtra and Karnataka have sent SOS messages to the Prime Minister and other central ministers, demanding immediate relief.

Many state governments blame the centre for the crisis, accusing it of not settling the subsidy bills of manufacturers, forcing them to stop supplies to government outlets. But the central government denies this. P. Chidamabaram, the finance minister, asserts there is no nationwide shortage of fertilisers, though some states could be facing a scarcity.

While both public and private fertiliser units have slowed down production because of the failure of the government to clear their bills, hurting supplies, another reason for the acute shortage is the agitation in Rajasthan by Gujjars, an OBC (Other Backward Class) group that is seeking scheduled tribe status.

While the Gujjar agitation was called off last week, it resulted in the blockage of hundreds of trains, including those carrying fertiliser to states like Maharashtra and Karnataka.

Maharashtra chief minister Vilasrao Deshmukh last week urged Railway minister Lalu Prasad Yadav to rush extra goods trains to the state with fertilisers to meet the growing scarcity. The south-west monsoon has set in most parts of Maharashtra, but farmers in many districts were without adequate fertilisers.

Thousands of farmers have committed suicide in recent years in backward regions of the state like Vidarbha and Marathawada. Most of them resorted to such drastic steps after the failure of the rains, and their inability to pay off their loans to money-lenders. The Maharashtra government is worried that this year, the fertiliser shortage might lead to another round of suicides.

With state assembly elections next year – and the general elections to be held much earlier – political parties in the state have already launched a campaign against the Congress-Nationalist Congress Party (NCP) regime, accusing it of being anti-farmer. Not surprisingly, the Congress and other parties accuse the Bharatiya Janata Party (BJP) of being anti-farmer in the neighbouring state of Karnataka.

Chief minister B.S. Yeddyurappa, who alleges there is a political conspiracy to tarnish his new government, says that farmers are worried about a possible shortage of fertilisers and have started hoarding the stuff, many even going in for loans to buy excess quantities. “There are a lot of black-market sales of fertilisers,” says the newly-elected chief minister.

The central government has asked states facing a shortage of fertiliser to take action against hoarders and black marketeers. According to fertiliser secretary J.S. Sarma, India had adequate stock of fertilisers and there is no need for farmers to panic. However, fears have led to hoarding of fertiliser, causing shortages in some parts of the country. *****

BUT a classic example is in Kerala – the first state in the sub-continent to get the south-west monsoon in the beginning of June – where farmers are accusing a public sector fertiliser unit of not supplying them the stuff. Fertilisers and Chemicals Travancore Ltd (FACT) supplies a popular brand of fertiliser to farmers in the state.

However, the central government has still not cleared its dues resulting in a cash crunch. The unit has decided to slash production by half to help it tide over the crisis. Sulphur prices have also gone up by several times in recent months, crippling FACT’s operations. This has affected farmers in all the four southern states – Kerala, Tamil Nadu, Karnataka and Andhra Pradesh – who are dependent on FACT.

The Indian government fixes the price of fertilisers that are sold to farmers. All companies have to sell it at that rate, but can claim the difference – between the sale price and the cost of production, plus a reasonable profit – from the government through a fertiliser subsidy.

This distorts the price of fertilisers; for instance, the subsidy on urea works out to almost 75 per cent. Fertiliser manufactures complain that the government is slow in clearing its dues. So far, last year’s dues amounting to about Rs400 billion have still to be cleared by the government, the industry claims.

The delay in making the subsidy payments has crippled many of the manufacturers, who are unable to pay higher price for feedstock and imported raw materials. Consequently, they are forced to curtail production, hurting supplies.

The centre is also worried about the ballooning fertiliser subsidy. This year, the fertiliser subsidy is likely to double to a whopping one trillion rupees, as international prices are soaring. Last year, the subsidy worked out to over Rs400 billion. But lack of fertiliser can result in reduced foodgrain production.

Fertiliser subsidies have soared during the United Progessive Alliance (UPA) government’s tenure. It added up to a mere Rs157 billion in 2004-05, and is expected to almost touch the trillion-rupee-mark this fiscal, the last year of the UPA government. The government was forced to come out with Rs75 billion worth of ‘fertiliser’ bonds to compensate the companies for the subsidy.

The primary sector – comprising mainly agriculture – has seen anaemic growth in India in recent years. While the secondary (industry) and tertiary (services) sectors have been growing at almost double-digit rates, agriculture has been holding back GDP growth. For the financial year ended March 31, agriculture grew at a much slower pace of 2.6 per cent, as against 3.8 per cent in the previous fiscal.

Last week, the union cabinet came out with a new nutrient-based pricing policy for subsidising fertilisers. Earlier, subsidies were product-based and available only for specific ones such as urea, di-ammonium phosphate (DAP), muriate of potash (MoP), etc. The switch-over to nutrient-based pricing is likely to help the government curb fertiliser subsidies.

According to Chidambaram, the new policy will help lower prices of some varieties by an average of Rs1,416 a tonne. The move will also encourage farmers to move to complex fertilisers and maintain balance in the soil, says the minister. The government also decided to shift to a unified freight subsidy regime, ensuring that fertilisers are available in all parts of the country at uniform prices.

Fertiliser production in India has remained stagnant for several years, with the industry not having the funds to invest in new units or to enhance capacities. In fact, last year production fell by three million tonnes, as companies slashed output because of delayed payment of subsidies by the government.

India had to import about 14 million tonnes of fertilisers to meet its requirements. Fertiliser shortage is likely to become even more acute over the coming years, as the industry has not invested in any new capacities.