Fertilizer bungle: real reason for Maya’s defeat

Most political pundits have explained the Uttar Pradesh assembly election results in sectarian terms. They say Mayawati’s BSP lost Muslim voters to the Samajwadi Party (SP) and Brahmins to the Congress and BJP. However , this is mere speculation. We have no hard data on shifts in community voting patterns. Even a new survey of community voting trends will lack credibility, since we know that voters lie to surveyors. This indeed is why exit polls in India go so badly wrong.

The SP increased its vote by a very modest 3.8%, from 25.4% in 2007 to 29.2% this time. The BSP lost 4.5% in vote share, from 30.4% to 25.9%. Maybe some fraction of this was due to community shifts. Yet any journalist who toured UP will testify to widespread anger among farmers over the rabi fertilizer shortage. In a state where 60% of the population is in farming, fertilizer anger might have been the key reason for Mayawati’s defeat.

Farmers in UP say that they have never before suffered so much in fertilizer distribution. Many complain that their yields are going to plummet because they could not get urea. They say that the usual distribution agencies and panchayat samitis simply did not have enough urea this year. Farmers who queued up for hours went home empty-handed . This led to some angry farmer demonstrations, which were broken up by lathi charges. One pained farmer told me, “We went for fertilizers but only got lathis.”

One’s initial reaction was amazement that Mayawati could have bungled so badly. She is street smart, with an ear to the ground. How could she have neglected something as critical as fertilizer distribution in an election year? Why did she not ensure that there was more than enough for all?

However, on further investigation, the story turned out to be much more complicated. It started from faulty policy making in New Delhi. All fertilizer prices were controlled for years, and New Delhi was very reluctant to increase prices even though the price of inputs (like naphtha and gas) rose sharply in the last decade. No new fertilizer plant came up in the last decade, thanks to price control, so rising demand was met by rising imports. The global price of fertilisers shot up in 2008, and remained high since. This sent the Centre’s fertiliser subsidy through the roof.

The fertiliser subsidy bill may cross Rs 70,000 crore this year even after delaying due payments to fertilizer companies to the next fiscal year. To put the subsidy in perspective, it is now double the Nrega spending of Rs 35,000 crore.

To curb this drain, the government decided two years ago to switch to a nutrient-based subsidy. This envisaged afixed subsidy per kilo of each nutrient—nitrogen , phosphorus and potash. Subject to this, market prices were to fluctuate along with import prices. The government said this would promote production of complex fertilizers with multiple nutrients, which would improve the soil.

However, while the nutrient based subsidy (NBS) was made operative from April 2010 for phosphorus and potassium , the government lacked the courage to apply it to nitrogenous fertilizers like urea, which remained under total price control. Result: the price of phosphoric and potassic fertilizers doubled, while that of urea remained unchanged.

Farmers are not stupid. Millions abandoned phosphatic fertilizers (mainly di-ammonium phosphate) and sought urea alone. This might not be optimal for their soil, but would be far more profitable.

Nobody in New Delhi or Lucknow should have been surprised by the farmer reaction, yet they did not fully grasp the consequences. Since the price of phosphatic fertilizer had doubled by this rabi season, the demand for cheap urea grew beyond all expectation. Urea shipments to UP might have been enough in a normal year, but proved grossly insufficient to meet burgeoning demand this year. There was phosphatic fertliser aplenty in UP, but not remotely enough urea.

This led to diversion of urea from depots into the black market, where it sold at double the controlled price. Rumours spread of large quantities being smuggled out to Nepal. Farmers roundly blamed Mayawati for this corruption and mismanagement. This alone might have shifted 3-4 % of her vote share to other parties, ensuring her defeat.

The fertilizer bungle must stop. The nutrient based subsidy must be extended to urea too, letting its price rise in line with other nutrients. This will curb the huge fertilizer subsidy, improve soil quality by encouraging rational use of all three nutrients, and avoid sudden shortages and blackmarketing. In the absence of reform, the fertilizer bungle could sink the UPA in the 2014 elections.

What do you think?