A farmer gets a fertilizer subsidy if they buy the product at a price lower than the MRP (Maximum Retail Price), which means that the price is lower than the average demand-and-supply rate or the typical cost of production and import. Even though the farmer is the one who eventually benefits, the fertilizer subsidy is given to the corporation that makes fertilizer.
A sharp increase in the global prices of urea, di-ammonium phosphate (DAP), and muriate of potash (MoP) in the last year may cause India’s fertilizer subsidy costs to reach Rs 2 trillion in 2022-23, according to a statement made by an official in the fertilizer ministry.
Compared to a smaller range of about ‘70,000-80,000 crore in the preceding few years, the annual budget expenditure on fertilizer subsidy will be much more than the mark of Rs 1 trillion in 2022-23. This will be the third year in a row that this will be the case.
What is a Urea Subsidy?
- Urea Subsidy enables farmers to purchase Urea at a price lower than the MRP (Maximum Retail Price). It is any natural, organic, or inorganic material that provides one or more of the chemical/nutritional ingredients required for plant development. Urea, sometimes known as carbamide, is the carbonic acid diamide. It has the formula H2NCONH2.
- Farmers are given Urea at a legally mandated Maximum Retail Price (MRP). The recommended retail price (MRP) for a 45-kilogram bag of Urea is Rs. 242 per bag, while the recommended retail price (MRP) for a 50-kilogram bag of Urea is Rs. 268 per bag. These prices do not include any fees or taxes that may be imposed (exclusive of charges towards neem coating and taxes as applicable).
Benefits of Urea:
- Superior Nitrogen content
- Low cost of manufacturing due to the natural origin of the supply
- Non-flammable and risk-free storing
- Comprehensive applicability, including all varieties of crops and soils
- pH neutral and safe for crops and soil
- It includes nitrogen-rich fertilizer that helps plants grow faster, which means they put out more new growth and get fuller.
- Urea fertilizer promotes plant growth by facilitating photosynthesis.
Nutrient Based Subsidy Scheme (NCBS):
For the Kharif season (April-September 2022), the Nutrient Based Subsidy (NBS) rates for phosphatic and potassic (P&K) fertilizers would be Rs 60,939 crore, up from Rs 57,150 crore last year. The increased subsidy protects farmers against worldwide market price rises in di-ammonium phosphate (DAP) and other non-urea fertilizers.
The NBS subsidy for the Kharif and Rabi seasons was Rs 28,495 crore and Rs 28,655 crore, respectively, last year.
Benefits:
- Reduce the subsidy outlay, reducing the Government of India’s subsidy burden.
- Prevent Urea from being diverted for industrial usage.
Drawbacks:
- The plan does not cover Urea.
- NBS subsidy payments are being delayed. As a result, fertilizer firms place a greater emphasis on Urea than on other fertilizers.
- Phosphoric and potassium fertilizer costs have risen.
- Farmers use too much Urea. As a result, the optimal NPK ratio is thrown off.
Aim of the Nutrient Based Scheme:
- The plan seeks to guarantee that a sufficient supply of P&K is available to farmers at legally regulated costs to maintain agricultural development and ensure balanced nutrient application to the soil.
- Its goals include guaranteeing balanced fertilizer usage, increasing agricultural production, fostering the expansion of the domestic fertilizer sector, and lowering the subsidy burden.
Nutrient-Based Scheme Allocations:
- The Nutrient Based Subsidy Scheme (NBS) enables producers, marketers, and importers to set fair MRPs for Phosphatic and Potassic (P&K) fertilizers.
- The MRP is determined by considering the local and foreign costs of P&K fertilizers, the country’s inventory levels, and the currency exchange rate.
Conclusion:
According to government projections, the fertilizer supply for the 2022 Kharif season would be 48.55 million tonnes (MT), comprising 10.47 MT of imported fertilizer and 25.47 MT of locally produced soil nutrients versus a need of 35.43 million tonnes (MT).
Farmers pay a set price of Rs 242 per bag (45 kg) for Urea, which covers around 20% of the cost of production; the government pays the rest as a subsidy to fertilizer facilities.