The urea industry is worried about the implications of the gas price hike. What is your view?
First, we have to be realistic. Any input provider can continue supplying inputs only if he gets a reasonable price that makes it a profitable activity for him. If the prices have to go up, I guess we may not have much of a choice.
Secondly, I am convinced that the farmer will not mind paying a bit more, if he can only be allowed to earn a bit more. If the earning is good, there is no reason why he will not agree to pay a bit more.
Third, I also believe that we have to change the manner in which we give subsidies to the fertiliser industry. In order to bring in efficiencies in the industry, the government must introduce a system of incentivising those companies which show greater efficiency in producing fertilisers. Unless this is done, we shall be rewarding inefficiency.
Linked to this is also the issue of a nutrient-based subsidy that the government has been talking about. The norm may be 4:2:1 where 4 is urea, 2 is phosphates and 1 is potash. But soil conditions vary from area to area, and this ratio may have to be tweaked.
This is where we have been urging the government to link all CSR expenditure for fertiliser companies to farmer-linked extension schemes which educate the farmer on how to use nutrients for his soil. This programme must be linked to agricultural universities in each state as well, to ensure that the knowledge is passed on from the private sector to the students. Unless this is done, you will not be using fertilisers effectively.
And the danger with inefficient fertiliser producers is two-fold. First, it increases the subsidy bill. Second, it also degrades soil quality. The result is lower income for the farmer, and a huge bill for the government.
Wouldn't micro-irrigation, which includes fertigation, be one option?
Yes. But there are only two states that have implemented micro-irrigation well – Gujarat and Andhra Pradesh. Both have excellent well-monitored farmer extension services in place.
What about the possibility of producing fertilisers cheap overseas, and importing it into India?
Lower import prices compared to the possible prices when gas prices get increased may not mean anything. India is the second largest consumer of fertilisers in the world, and the largest importer. The sheer volumes imported make India the import price setter. If you do not have a domestic production base, you will be vulnerable to international market prices which can go up tremendously.
Producing urea in gas rich countries where gas is cheap is a good idea. But it must be done quickly on a G-to-G or government-to-government basis, taking into account several factors besides economics. You also need to ensure that India's fertiliser consumption does not get jeopardised because of a coup in one country. So you need to broad-base your sourcing countries as well.