Friday, August 15, 2008

Severe Fertilizers Shortage

India is facing severe fertilizers shortage problem which leads to downfall in agriculture output. Now food price inflation is high and decline in farm output would result in a further spike in food prices. A protests in Andhra Pradesh, Karnataka, Maharashtra and Punjab were resulted the death of farmers and injuries to several others.

The main types of fertilizers are three—Nitrogen, Potash and Phosphate and some complex fertilizers. In India, the government fixes the price at which fertilizers are sold; it also pays manufacturers the difference between price and their cost of manufacture plus a fair return. The fertilizer prices are up because most are made by energy-intensive processes, that the increase in production costs of fertilizers on account of soaring crude prices had begun to squeeze margins of domestic fertilizer firms and this would see the government’s subsidy burden touch an estimated Rs95,000 crore in 2008-09, 1.9% of India’s gross domestic product. The major public sector fertilizer company “Fertilizers & Chemicals Travancore Ltd” is also facing problems with spiraling price of inputs and working capital requirements.
The government should review the supply and demand of fertilizers in the States and the distribution shall be made through cooperative societies as well as private traders being made to ensure the smooth availability for kharif crops at the door step of farmers.