What is Subsidies (Fertilizer Subsidy)?
Historical Background
Key Points
8 points- 1.
Objective: To ensure adequate and affordable availability of fertilizers to farmers, thereby boosting agricultural production and food security.
- 2.
Mechanism: Primarily through concessional prices for farmers, with the difference between the cost of production/import and the selling price borne by the government.
- 3.
Types: Urea is statutorily controlled and subsidized, while Non-Urea fertilizers (DAP, MOP, NPKs) are under the Nutrient Based Subsidy (NBS) scheme.
- 4.
NBS Scheme (2010): Provides fixed per-tonne subsidy on specific nutrients (N, P, K, S) based on their nutrient content, encouraging balanced fertilization.
- 5.
Direct Benefit Transfer (DBT): Since 2018, fertilizer subsidies are disbursed to companies based on actual sales to farmers through Point of Sale (PoS) devices, with farmers paying the subsidized price.
- 6.
Challenges: High fiscal burden, overuse of urea leading to soil imbalance, environmental degradation, diversion/smuggling, and inefficient resource allocation.
- 7.
Reform Efforts: Focus on rationalizing subsidy, promoting efficient use, and encouraging alternative fertilizers.
- 8.
Stakeholders: Farmers, fertilizer manufacturers/importers, Ministry of Chemicals and Fertilizers, Ministry of Finance.
Visual Insights
Evolution of Fertilizer Subsidies in India
Shows the historical progression of fertilizer subsidies and related policies.
Fertilizer subsidies have been a cornerstone of India's agricultural policy since the Green Revolution, aiming to ensure food security. However, the system faces challenges related to fiscal burden, environmental degradation, and inefficient resource allocation.
- 1960s-70sGreen Revolution: Increased fertilizer use to boost agricultural production.
- 1970sIntroduction of Fertilizer Subsidies: To make fertilizers affordable for farmers.
- 1985Fertilizer (Control) Order: Regulates quality and distribution of fertilizers.
- 1991Economic Reforms: Shift towards market-oriented policies, but fertilizer subsidies continued.
- 2010Nutrient Based Subsidy (NBS) Scheme: Fixed subsidy on nutrients (N, P, K, S) to promote balanced fertilization.
- 2018Direct Benefit Transfer (DBT): Subsidy disbursed to companies based on actual sales through PoS devices.
- FY23Subsidy Outlay exceeds ₹2.5 lakh crore due to global price volatility.
- 2024Promotion of Nano-Urea: To reduce subsidy burden and improve efficiency.
- 2025Continued debate on rationalization of urea subsidy and bringing it under NBS.
Fertilizer Subsidy: Key Aspects
Illustrates the different facets and implications of fertilizer subsidies.
Fertilizer Subsidy
- ●Objectives
- ●Mechanism
- ●Challenges
- ●Reform Efforts
Recent Developments
5 developmentsSignificant increase in fertilizer subsidy budget due to global price volatility (e.g., over ₹2.5 lakh crore in FY23).
Promotion of nano-urea and other alternative fertilizers to reduce subsidy burden and improve efficiency.
Continued debate on rationalization of urea subsidy and bringing it under NBS.
Focus on soil health cards to promote balanced nutrient application.
Global supply chain disruptions impacting fertilizer availability and prices.