Nod for additional fertilizer subsidy

Nod for additional fertilizer subsidy

Subject : Governance

Context: The Cabinet Committee on Economic Affairs has approved the proposal to hike subsidy rates for phosphorus and potassium-based fertilizers by 140% in a bid to provide relief to farmers as the kharif sowing season begins.

Concept:

• Unlike urea, where the Centre sets a fixed maximum retail price, non-urea fertilizer prices are decontrolled, with the Centre fixing nutrient-based subsidy rates each year.
• So far, a 50 kg bag of di-ammonium phosphate (DAP), the fertilizer most popular with Indian farmers after urea, was sold at ₹1,200, including a subsidy of about ₹500.

Nutrient Based Subsidy Scheme

• Nutrient Based Subsidy (NBS) Programme for Fertilizers 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, except for Urea, based on the nutrient content present in them.
• The scheme is administered by the Department of Fertilizers under the Ministry of Chemicals & Fertilizers.
• In a recent development, the Cabinet Committee on Economic Affairs has approved the proposal of the Department of Fertilizers for the continuation of the Nutrient Based Subsidy (NBS) till 2019-20.
• The continuation of the Nutrient Based Subsidy Scheme will ensure that an adequate quantity of P&K is made available to the farmers at a statutory controlled price.

Union Budget 2021 and Nutrient Based Subsidy Scheme

• There have been no reforms in the Nutrient Based Subsidy Scheme in Union Budget 2021. Though Nirmala Sitharaman made an announcement to release an additional Rs 65,000 crore towards fertilisers subsidy over and above Rs 71,000 crore allocated in the Budget for Fiscal Year (FY) 21 and for FY22, she has allocated close to Rs 80,000 crore.

Nutrient Based Subsidy Scheme (NBS) Provisions

• In India, urea is the only controlled fertilizer and is sold at a statutory notified uniform sale price.
• Nutrient Based Subsidy Scheme (NBS) allows the manufacturers, marketers, and importers to fix the MRP of the Phosphatic and Potassic (P&K) fertilizers at reasonable levels.
• The domestic and international cost of P&K fertilisers is considered along with the country’s inventory levels and the currency exchange rate in order to decide the MRP.