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Viraaj Vashishth

March 13, 2025

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Govt. Schemes

Fertiliser Subsidy Scheme

This plan, aimed at making Fertilisers available to farmers in a cost effective way, is one of the most important government policies which helps improve farming in India. By providing subsidies, the scheme attempts to make sure farmers get the necessary Fertiliser to grow crops. This helps the farmers to produce more and helps ensure the country’s food security.

Overview of the Fertiliser Subsidy Scheme

The main goal of the subsidy scheme is to reduce the gap between what farmers can afford and the cost of Fertilisers. The subsidy becomes a protective measure against volatile prices in the international market. The scheme not only helps in lowering farmers’ input costs but also goes a long way in preserving the soil’s fertility and improving the yield of crops. The provision of subsidies for Fertilisers dates back to the 1970s, which became a part of the attempts to enhance farming productivity during the Green Revolution. Over the years, the scheme has gone through numerous modifications to respond to new issues and foster balanced application of nutrients.

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Current Subsidy Mechanisms

The fertiliser subsidy in India works essentially through two mechanisms:

1. Urea Subsidy Scheme: Under this scheme, Urea as a Fertiliser is sold at a statuary notified uniform Maximum Retail Price (MRP) of Rs. 242 per 45 kg bag (def not neem coating charges and taxes). The central government subsidizes the difference between the cost incurred and revenue earned by the nominated manufacturers/importers of Urea and Pharmers. The reimbursement is paid by the government to the manufacturers/importers of Urea.

2. Nutrient Based Subsidy (NBS) Scheme: Commenced in 2010, this NBS scheme covers phosphatic and potassic (P&K) Fertilisers and incorporates set subsidy regime for nitrogen-based Fertilisers called NPKS (N, P, K, S) where a subsidy set rate (in Rs) is declared on constituents during a year. Under this scheme, the manufacturer is free to set the MRP of urea and pay the subsidy amount which is the difference between the cost of production/import and MRP.

Recent Developments and Allocations

To cater dynamic requirements of farmers into the Indian market and to provide a steady non-disrupted supply of Fertilisers, a few decisions of the Indian government were strategically worked.

1. Rabi Season 2024: The endowed Cabinet sanctioned a sum of Rs. 24,474.53 crores as subsidy for phosphatic and potassic Fertilisers for Rabi season. This head was increased from Rs. 22,303 crores earmarked during last season, which manifested the government’s support towards the farmers with the increasing international costs.

2. Kharif Season 2024: The subsidized head of Rs. 24,420 crore was also sanctioned for the Kharif season. This guarantee ensures availability of such Di-Ammonium Phosphate (DAP) Fertilisers to the farmers at reasonable prices of Rs.1,350 per bag for branded DAP based Fertilisers.

Financial Implications

The financial injustice towards the subsidies of Fertilisers have a remarkable change in its dependency towards different global markets and local farming requirements. For example, during the fiscal year 2022-2023, the subsidy outlay for Fertilisers went up to Rs. 2.55 lakh crore, an estimate from the previous year Rs. 1.58 lakh crore provided.

This increment, observed, was due to the increase in the international prices of raw materials and Fertiliser.

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Implementation and Direct Benefit Transfer (DBT)

In order to achieve subsidy effectiveness as well as social equity, the government implemented the Direct Benefit Transfer (DBT) system within Fertilisers in October 2016. In this approach, a hundred percent guarantee on varied types of Fertiliser is paid out to the Fertiliser companies after the companies pays for the sales that they make to the customers through retailers. This method ensures that the subsidy is paid only after its relevant sale, thus helping in minimizing the chances of diversions and assuring the farmers receive Fertilisers at subsidized prices.

Reforms and the Way Forward

To tackle these issues, a number of reforms have been implemented and proposed.

1. Promotion of Alternative Fertilisers: Such as include the initiative on urean-coated neem to curtail urea usage in non-agricultural activities and to improve the efficiency of nitrogen use.

2. Balanced Nutrient Management: The use of organic manure and bio-Fertilisers alongside Fertilisers is being encouraged by the government in order to sustain soil health.

3. Capping Subsidized Fertiliser Purchases: There are plans to limit the number of subsidized Fertiliser bags a farmer can buy during a cropping season in order to avoid potential bulk purchases and diversion.

Conclusion

The Subsidy Scheme on Fertiliser is an integral component of India’s agricultural policy, ensuring that farmers have access to affordable Fertilisers. While the scheme has greatly contributed towards increasing agricultural productivity, there is a need to further analyze and modify the subsidy structure. Addressing the existing issues and providing long-term sustainability will require balanced Fertiliser application, better agricultural subsidy payments, and enhanced agricultural sustainability efforts.

FAQs

1. What does the Fertiliser Subsidy Scheme seek to achieve?

This scheme is designed to pay farmers the difference between the market price and the subsidized price of Fertilisers with the aim of improving agriculture through subsidized Fertilisers.

2. What is the process of Fertiliser Subsidy in India?

The procedure involves the Indian government paying subsidies to the Fertiliser manufacturers for selling Fertilisers at a lower price to farmers. In turn, the farmers get the Fertilisers at a much lower rate than before.

3. What are the Fertilisers that form the scope of the subsidy scheme?

This scheme encompasses the direct subsidized urea as well as the phosphatic and potassic(P&K) Fertilisers that come under the Nutrient Based Subsidy (NBS) system.

4. Who qualifies for the Indian Fertiliser subsidy?

Farmers throughout India can benefit from the subsidy, which is redeemable at the time of purchase from the registered vendors.

5. How does the subsidy scheme benefit farmers?

This scheme reduces farmers’ expenditure on inputs, encourages soil fertility, and sustains food safety through targeted intervention to key nutrients supply at cheaper rate.

6. What is the Nutrient Based Subsidy (NBS) scheme?

The NBS scheme permits the sale of P&K Fertilisers at market prices and offers a fixed subsidy for each kilogram of supplied nutrients like Nitrogen (N), Phosphate (P), Potash (K) and Sulphur (S).

7. What is Urea Subsidy in India?

Urea is sold for a set Maximum Retail Price (MRP), and the government pays the manufacturers the subsidy for the difference in production cost and selling price.

8. Has there been any changes in the amount of Fertiliser subsidy in the recent years?

Fertiliser subsidies have expanded due to alterations in global prices. Allocations reached Rs.2.55 lakh crore in 2022-23.

9. In what manner is the subsidy passed on to the farmers?

The subsidy payment is carried out through the system of Direct Benefit Transfer (DBT) which enables tracking of the sales in real time.

10. What are the challenges of the Fertiliser subsidy in India?

Some of the challenges are increased spending on subsidies, unequal proportion of Fertiliser consumption, and misuse of subsidized Fertilisers for non-agricultural purposes.

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