Nutrient Based Subsidy Scheme

Fertilizers are crucial productivity augmenting inputs. To meet the challenge of rising demand for food, feed, and fibre with limited land and water resources, it is imperative to augment land productivity and one way to do this is to make fertilisers easily accessible to farmers.
With this end in view, the fertiliser sector in the country is subsidised.

Issues

Crops require the right mix of three nutrients viz. nitrogen, phosphorus, and potassium or NPK (N helps in plant growth and development, P not only accelerates blooming and the growth of roots but also helps plants to withstand stress and K helps the process of photosynthesis and is essential to plant growth).
Imbalanced use of N, P and K leads to the loss of fertility of the soil over a period of time, which affects efficiency of fertilizer use and crop productivity.
In India, urea (a nitrogen based fertiliser) is the most commonly used fertiliser because it is highly subsidised. The excessive use of nitrogenous fertilisers has led to a distortion in the soil nutrient ratio. Against the ideal NPK (Nitrogen-Phosphorus-Potassium) consumption ratio of 4:2:1, the actual ratio in 2017-18 was 6.1:2.5:1.
Indiscriminate use of nitrogenous fertilizers is detrimental to the soil and the crop.
It also pollutes the groundwater. The nitrogen from fertilizers, which is converted to nitrate by the bacteria in the soil, leaches into the groundwater and washes out of the soil surface, entering streams and rivers.

In order to promote balanced fertilization of soil, Nutrient Based Subsidy (NBS) programme for fertilizer was initiated in the year 2010. Under the scheme, a fixed amount of subsidy decided on an annual basis is provided on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers based on its nutrient content.
The scheme aims at ensuring balanced nutrient application to the soil.
It also aims at improving agricultural productivity and promoting the growth of the indigenous fertilizers industry.
The scheme is being implemented by the Department of Fertilizers under the Ministry of Chemicals and Fertilizers.

With urea and fertilizer prices shooting up in the aftermath of the Russia-Ukraine conflict, the Union Cabinet has approved an enhancement in subsidies on non-urea fertilizers for the upcoming Kharif crop, to ₹60,939 crore.
While the government fixes the retail price of urea and subsidises producers based on the difference between costs and the fixed selling price, it pays a subsidy to non-urea fertilizer makers on the basis of nutrient-based rates.
The subsidy will be ₹2,501 per bag on Di-ammonium phosphate (DAP), instead of the existing subsidy of ₹1,650 per bag, which is a 50% increase over last year’s subsidy rates. The increase in the prices of DAP and its raw material is in the range of about 80%.
Prices of phosphoric acid and rock phosphate, key ingredients in such fertilisers have increased by 92% and 99%, respectively, over the 12-month period till March 2022, rating agency Crisil pointed out recently, warning that the country’s fertiliser subsidy bill in 2022-23 could hit a record high of ₹1.65 lakh crore to ₹1.9 lakh crore.

Fertiliser subsidy in India

In India, the fertiliser subsidy accounts for the second largest subsidy after food.
Currently, Urea is the only controlled fertilizer and the government fixes the maximum retail price (MRP). The difference between the production cost and the MRP is reimbursed to manufacturers.
Retail prices of non-urea fertilisers such as Di-ammonium Phosphate (most widely used one after urea), Muriate of Potash (MoP) are decontrolled and are determined by manufacturers, while the Centre gives a fixed subsidy each year.