Under-funding of Nutrient Subsidy Schemes

Syllabus: GS3/ Economy, Agriculture

In News

• The Parliamentary Standing Committee on Chemicals and Fertilizers highlights several key issues and recommendations regarding India’s fertilizer sector.

Key Recommendations of the Committee:

• Funding Concerns: The committee is concerned about the Ministry of Finance’s reduction in the Department of Fertilizers’ budget allocation for 2025-26, specifically impacting the Nutrient-Based Subsidy (NBS) and Urea Subsidy Schemes.
  • It urges the Union Fertilizers Ministry to seek additional funds at the revised estimate stage to prevent negative effects on farmer subsidy schemes.
• Nano Fertilizer Promotion: Committee emphasizes the need to expand production capacity for nano urea and nano diammonium phosphate (DAP).
  • It calls for a strategy to popularize these nano fertilizers among farmers, citing their potential to improve crop yields and reduce conventional fertilizer usage.
• Raw Material Security: The committee highlights the lack of mining lease agreements for raw material extraction, exploration, refining, or production.
  • It recommends that the Centre enter into such agreements to strengthen domestic supply and achieve self-sufficiency in fertilizers.
• Fund Utilization: It points out underutilization of funds across various fertilizer categories during 2024-25.
  • It recommends that the Centre ensures full utilization of allocations in a planned and continuous manner.
• Urea Subsidy Scheme: Given urea’s importance in food-grain production, the committee stresses the need for the Urea Subsidy Scheme to continue.

Nutrient Based Subsidy (NBS) Policy

• Objective: Launched in 2010, the NBS Policy aims to:
  • Provide subsidized fertilizers to farmers
  • Promote balanced use of nutrients, ensuring soil health
  • Reduce fiscal burden by making subsidy nutrient-specific 
• Validity: The policy has been approved for implementation until the financial year 2025-26.
• Legal Framework: It operates under the Fertilizer (Control) Order (FCO), 1985, which is issued under the Essential Commodities Act, 1955.
  • The FCO sets standards for fertilizer use, specifications, licensing, and trading regulations.
• Scope and Eligibility: The NBS policy covers 25 grades of Phosphorus (P) and Potassium (K) fertilizers, including common ones like Di Ammonium Phosphate (DAP), Muriate of Potash (MOP), Mono Ammonium Phosphate (MAP), and Triple Super Phosphate (TSP).
  • The government sets a fixed subsidy rate (in Rupees per kilogram) for each primary nutrient in these fertilizers: Nitrogen (N), Phosphate (P), Potash (K), and Sulphur (S).
• Subsidy Determination: An Inter-Ministerial Committee (IMC) plays a critical role in recommending the per-nutrient subsidy rates for N, P, K, and S.
  • These recommendations are made before the start of each financial year and are then considered by the Department of Fertilizers for final approval.
• Key implications: The NBS policy allows for the price of fertilizers to fluctuate according to the cost of the raw materials used to produce the fertilizers. Thus the subsidy amount changes, but the farmer still receives a subsidized fertilizer.

Source: TH