Fertiliser prices rise by Tk5 per kg as govt reduces subsidy

The government has increased the price of fertiliser at the farmers' level for the second time in nine months to deal with the excessive pressure of subsidy on fertilisers. This time, the price of urea, DAP, TSP and MOP fertilisers has been increased by Tk5 per kilogram.

Sources at the agriculture ministry said the government will save about Tk7,000 crore annually on subsidy expenditure for fertilisers by hiking the price as the money will come from the farmers' pockets.

From now on, the price of urea at the dealer and farmer levels will be Tk25 and Tk27 per kg respectively, which was Tk20 and Tk22 previously, according to a notice issued by the ministry yesterday.

The price of di-ammonium phosphate (DAP) has been fixed at Tk19 and Tk21 per kg, and the price of muriate of potash (MOP) will be Tk18 and Tk20 per kg for dealers and farmers respectively.

The price of triple superphosphate (TSP) will stay the same as urea.

According to the agriculture ministry, the government provided a subsidy of Tk74 per kg of urea in FY22. The government's subsidy has come down to Tk21 per kg after the fall in prices in the international market and the current increase in the price at home. Subsidy for TSP has come down from Tk50 to Tk23, for MOP from Tk41 to Tk40 and for DAP from Tk79 to Tk49.

Earlier this month, Agriculture Minister Muhammad Abdur Razzaque said in a meeting at the Secretariat that fertiliser prices would not be increased and the government had no plans to increase them even in the coming fiscal year 2023-24.

Yesterday he said, "I did not want to increase fertiliser prices, but the finance ministry was adamant that the prices should be increased. The prime minister also said not to increase the fertiliser prices, but at the request of the finance ministry, it had to be increased.

He further said fertiliser prices have not increased in the country as much as they have in the global market. The government still has to subsidise a huge amount of money. However, if the global price comes down, the price of fertiliser will be adjusted.

The agriculture minister said if the price of fertiliser falls in the global market, it will be adjusted in the country as well. But the decision to increase the price of fertiliser has been made at a time when fertiliser prices in the world market have been dropping continuously and the government's expenditure has also started to decrease.

According to the agriculture ministry, fertiliser prices have increased 3-4 times in the international market in the last three years, which in turn pushed up the government's subsidy cost from around Tk7,420 crore in FY21 to around Tk28,000 crore in FY22. Around Tk46,000 crore will be needed for subsidy in FY23.

The agriculture ministry has determined that of the demand of around 68.42 lakh tonnes of 11 types of fertilisers in FY24, the demand for urea will be 27 lakh tonnes, for DAP it will be 16 lakh tonnes, for TSP 7.5 lakh tonnes and for MOP 9 lakh tonnes.

Fertiliser prices hiked to ease dollar crisis

Sources at the finance ministry said the decision to increase fertiliser prices has been taken mainly to avoid the pressure of the increase in the dollar exchange rate and to implement the International Monetary Fund's condition of reducing subsidies.

The price of fertilisers has decreased in the international market, but the country has to spend more for importing the product as the value of the dollar jumped by 25% in the last one year. The government has decided to take a part of this additional cost of exchange rate from the farmers.

The finance ministry is allocating Tk17,000 crore for agricultural subsidy in FY24.

The agriculture ministry imports a major part of the fertiliser needed in the country and the industries ministry imports the rest. The finance ministry has given a credit guarantee of Tk16,000 crore to the Sonali Bank and of Tk8,000 crore to the Janata Bank for the import of fertilisers by the agriculture ministry.

The agriculture ministry could import fertilisers worth Tk24,000 crore with the credit guarantee given to the two banks, but due to the hike in fertiliser prices in the international market following the start of the Russia-Ukraine war, the ministry imported fertilisers worth more than twice the amount of the guarantee.

The banks opened LCs for the agriculture ministry but could not pay the price on their own. They had to clear the LCs liabilities for importing fertilisers with dollars supplied by the Bangladesh Bank.

Experts have said Bangladeshi farmers use too much fertiliser, which is a waste of the product. According to the Food and Agriculture Organisation of the United Nations (FAO), 320 kg of fertilisers are used per hectare in Bangladesh annually, whereas the global average is 181 kg per hectare.

Fertiliser price hike not to affect Boro production

The season for Boro cultivation is going on across the country. This is the biggest season of rice production and the stability of the local rice market throughout the year depends on this season's production. Farmers and agricultural researchers said most of the Boro crops are in the maturity stage, when fertilisers are not used much, so the price hike will not affect rice production.

Dr Md Shahjahan Kabir, director general of Bangladesh Rice Research Institute, told TBS, "Depending on the variety, 35-40 kg urea, 13 kg TSP, 22 kg MOP, 12 kg DAP are required per bigha for Boro cultivation. But there is no need for fertiliser at the current stage of paddy cultivation."

Agriculture Minister Dr Muhammad Abdur Razzaque said, "There will be pressure on the farmers due to the increase in fertiliser prices, but production will not decrease. The agriculture ministry will try to compensate the loss of the farmers in seed prices or otherwise."

However, researchers said even if there is no effect of the increase in fertiliser prices at this moment, the additional cost will burden farmers in all subsequent seasons, which may discourage them from production.

Besides, the price hike will increase pressure on maize, vegetables and other crop farmers.

For his part, Planning Minister Mannan said the hike in fertiliser prices will increase inflation.