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Government enhances DAP fertiliser subsidy

Context:

The government has enhanced the subsidy on di-ammonium phosphate or DAP fertilisers in order to retain the selling price for farmers at the current level, following a review meeting on fertiliser prices chaired by Prime Minister.

Recently, the international prices of phosphoric acid, ammonia etc. used in DAP have gone up by 60% to 70%.

Relevance:

GS-III: Agriculture, GS-III: Indian Economy (Growth and Development of Indian Economy, Mobilization of Resources)

Dimensions of the Article:

  1. About Nutrient-Based Subsidy Regime
  2. Issues Related to NBS

About Nutrient-Based Subsidy Regime

  • Under the Nutrient-based subsidy (NBS) regime – fertilizers are provided to the farmers at the subsidized rates based on the nutrients (N, P, K & S) contained in these fertilizers.
  • Also, the fertilizers which are fortified with secondary and micronutrients such as molybdenum (Mo) and zinc are given additional subsidy.
  • Under the Nutrient-based subsidy (NBS) regime, the subsidy on Phosphatic and Potassic (P&K) fertilizers is announced by the Government on an annual basis for each nutrient on a per kg basis – which are determined taking into account the international and domestic prices of P&K fertilizers, exchange rate, inventory level in the country etc.
  • NBS policy intends to increase the consumption of P&K fertilizers so that optimum balance (N:P:K= 4:2:1 ) of NPK fertilization is achieved.
  • This would improve soil health and as a result the yield from the crops would increase resulting in enhanced income to the farmers.
  • Also, as the government expects rational use of fertilizers, this would also ease off the burden of fertilizer subsidy.
  • It is being implemented from April 2010 by the Department of Fertilizers, Ministry of Chemicals & Fertilizers.

Issues Related to NBS

  • Urea is left-out in the scheme and hence it remains under price control as NBS has been implemented only in other fertilizers.
  • There is an imbalance as the price of fertilizers (other than urea) — which were decontrolled have gone up from 2.5 to four times during the 2010-2020 decade. However, since 2010, the price of urea has increased only by 11%. This has led to farmers using more urea than before, which has further worsened fertilizer imbalance.
  • Considering that fertilizer subsidy is the second-biggest subsidy after food subsidy, the NBS policy is not only damaging the fiscal health of the economy but also proving detrimental to the soil health of the country.
  • Subsidised urea is getting diverted to bulk buyers/traders or even non-agricultural users such as plywood and animal feed makers. It is being smuggled to neighbouring countries like Bangladesh and Nepal.

-Source: PIB, The Hindu

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September 2022
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