India Cuts Fertilizer Subsidy Even as Supply Crisis Lifts Prices

(Bloomberg) -- India will reduce subsidies on soil nutrients, such as urea, di-ammonium phosphate and potash, even as prices have climbed on a global supply squeeze.

The world's biggest buyer of urea and di-ammonium phosphate will spend 1.05 trillion rupees ($14 billion) in the year from April 1, down from 1.4 trillion a year earlier, Finance Minister Nirmala Sitharaman said in her budget speech in parliament. The government will promote chemical-free natural farming throughout the country, she said on Tuesday. 

The move may potentially hurt crop yields and earnings of farmers as fertilizer use may fall in the country, where nearly 60% of the 1.4 billion population depends on farming, directly or indirectly, for their livelihood. Small and marginal farmers having as much as 2 hectares (4.9 acres) of land constitute some 86% of the total land holdings in the country.

India is among the worst-affected nations to have been hit by a fertilizer crisis. Prices of crop nutrients have soared globally as tight coal and natural gas supplies forced some fertilizer plants in Europe to close. China and Russia have also curbed exports to safeguard their domestic availability. Fertilizer prices are expected to remain elevated this year.

The South Asian nation, the world's biggest grower of cotton and second-largest producer of rice, wheat and sugar, imports about a third of its fertilizer needs.

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