The government has decided to remove subsidy on DAP for the coming Kharif season. This may take the price of the fertiliser to Rs 5500 per 50 kg bag in the domestic market. Sources told Business Recorder here on Tuesday that this decision was to be taken as a result of International Monetary Fund (IMF) conditionalities. According to sources, the subsidy is likely to be removed from December 31, 2008.
"The government is not paying even a single penny as subsidy on DAP for the past two months, the reason being reduction in the price of the commodity in the international market against that of last year. So, the growers are not bearing much financial crunch in using DAP as was the case in the past", sources added.
They said: "The wheat season has come to an end; so, the growers do not need DAP for wheat, but during Kharif they will be certainly in need of DAP for cotton. With the removal of subsidy, the growers would have to pay huge amount of money to purchase even a single bag of DAP".
The price of DAP in the international market is $400 per ton ie, Rs 1800 per 50 kg bag. That is why, DAP is being sold at Rs 2000-2200 per 50 kg in the domestic market. "When the price of DAP in the international market increased to $1300 per ton (equal to Rs 5000 per 50kg bag), the government was providing it on subsidised rate ie, Rs 2200 per 50 kg bag.
But what would happen if the price of the commodity started increasing during Kharif season in the international market?" sources questioned. It means that if the price of DAP again starts increasing in the international market the commodity would be sold at a much higher price in the domestic market.
A senior official of the Ministry of Food and Agriculture (Minfa) told this scribe that the government had announced to spend Rs 27 billion as subsidy on DAP in the 2008-09 budget. "We have already spent Rs 27.1 billion to subsidise DAP when its price was $1300 per ton in international market. Now the government does not have the financial resources to subsidise DAP again", he added.