Fertiliser industry pitches for subsidy reforms, GST relief as cost pressures mount

New Delhi, Dec 10 (PTI) The fertiliser industry on Wednesday sought a slew of policy reforms, including extension of nutrient-based subsidy (NBS) to urea, transparent subsidy mechanisms and resolution of GST-related input tax credit (ITC) accumulation to improve sector viability and attract fresh investments.

Speaking at the Fertilizer Association of India's (FAI) annual seminar, FAI Chairman S Shankarsubramanian flagged mounting cost pressures from higher energy prices, escalating logistics expenses and mandatory compliance requirements that have particularly hit older urea units operating on vintage technology.

"Ensuring a fair and timely revision of fixed costs is essential for sustaining operations and encouraging future investments. This reform has been pending for a long time and your immediate support can provide much-needed relief," he said, addressing Fertilisers Secretary Rajat Kumar Mishra at the event, which was attended by more than 1,500 participants.

The FAI chairman welcomed the government's decision to pilot direct benefit transfer (DBT) linkage to farmers based on land holdings, saying it would promote balanced fertiliser use and empower farmers to make informed decisions based on soil health.

However, FAI flagged the persistent imbalance in nitrogen-phosphorus-potassium (NPK) application that has severely impacted soil health and diminished the fertiliser-to-grain response ratio.

The association urged stable NBS policy implementation, extension of NBS to urea and transparent subsidy predictability to prevent pricing distortions from ad hoc rate implementation.

Appreciating the recent GST rate reduction from 18 per cent to 5 per cent on key raw materials, the FAI chairman pointed to a structural mismatch due to subsidy resulting in substantial input tax credit (ITC) accumulation.

FAI requested seamless ITC refunds with necessary communication from the finance ministry to address this inverted duty structure.

The sector also sought reforms to simplify the Fertilizer Control Order (FCO) and provide operational flexibility for faster introduction of newer products to enhance ease of doing business.

On phosphogypsum, the industry called for GST rate rationalisation and promotion of its usage in road infrastructure to support utilisation and create opportunities for new phosphoric acid facilities to boost domestic production.

FAI positioned single super phosphate (SSP) as a true 'Make in India' fertiliser that could serve as an alternative to imported DAP, urging stable NBS rate implementation and continuity of freight subsidy to improve capacity utilisation.

Shankarsubramanian noted that farm-level fertiliser consumption improved 10 per cent to 71 million tonnes in 2024-25, resulting in record foodgrain production of 358 million tonnes. First-half consumption in the current year was up 4 per cent, with initial estimates indicating another record output season.

The industry credited strategic long-term tie-ups with key nations, including Saudi Arabia, Jordan, Morocco, Qatar, and Russia for insulating the farm sector from international supply chain disruptions, particularly amid supply issues from China.

The recent MoU with Russia by Indian fertiliser companies will further enhance availability, the industry said.

Over the past five years, renewed participation from both public and private sector entities has driven addition of approximately 7 million tonne of urea capacity and announcement of 2 million tonne in P&K capacity.

This momentum is supported by favourable policies, including efficient DBT subsidy settlement, absorption of global commodity price shocks, and GST revisions on raw materials.

The association requested the ministry's participation in a 'Chintan Shivir' with industry members to present viewpoints and receive feedback on key issues and opportunities before the sector. PTI LUX TRB