Fertilizer is defined as any organic or inorganic substance, natural or artificial supplying one or more of the chemical elements/nutrients required for plant growth.

SUBSIDY TO FERTILIZERS

• Why a Subsidy – Allows an individual to buy a product or use a service at a lower price than its market cost
• Green Revolution started provisions of Subsidy to fertilizers
• Under the subsidy regime, farmers buy fertilizers at Maximum Retail Prices (MRP). However, this MRP is below the normal supply-and-demand-based market rates or what it costs to produce/import the m.

IN THE HISTORY

• The Economic Survey of 1991-92 noted that fertilizer prices remained almost unchanged from July 1981 to July 1991.
• The Union Budget of July 1991 raised the issue prices of fertilizers by 30%, and small and marginal farmers were exempted from the price increase.
• Later due to opposition to increase fertilizer prices, the increase in the price of urea was rolled back to 17% a year later over the pre-reform price. This change disturbed the relative prices of various fertilizers and resulted in a big shift in the composition of fertilizers used in the country in favour of urea and thus N.
• The ratio of use of N:P:K increased from 5.9:2.4:1 in 1991-92 to 9.7:2.9:1 in 1993-94. Farmers tended to move towards balanced use, but policy and price changes reversed the favourable trend a couple of times in the last three decades. This has led to increase in indiscriminate and imbalanced use of fertilizers.
• Concerned with the adverse environmental impact of certain chemical fertilizers, some sections of society suggest the use of organic fertilizers and biofertilizers instead. There is a growing demand to provide subsidies and other incentives for organic fertilizers and biofertilizers to match those provided for chemical fertilizers.
• Fertilizer subsidy has doubled in a short period of three years. For 2021-22, the Union Budget has estimated fertilizer subsidy at ₹79,530 crore (from ₹66,468 crore in 2017-18) but it is likely to reach a much higher level due to the recent upsurge in the prices of energy, the international prices of urea and other fertilizers, and India’s dependence on imports.

Nutrient Based Subsidy (NBS)

• Introduced in 2010
• To address the growing imbalance in fertilizer use
• The government fixes subsidy on an annual basis based on the weight of the different macro/micronutrient (N, P, K, S, etc) contained in the fertilizer
• Manufacturers/Marketers are allowed to fix the Maximum Retail Price (MRP) at a reasonable level
• However Urea was not covered

PRESENT CHALLENGES

• The total demand for urea in the country is about 34-35 million tonnes (mln t) whereas the domestic production is about 25 mln t.
• The international prices of fertilizers are volatile and almost directly proportional to energy prices. Besides, cartels of major global producers have a strong influence on prices. These extraordinary price rises are on account of a sharp upsurge in international energy prices and supply constraints in major producing countries due to robust domestic demand, production cuts and export restrictions. This also coincides with the peak demand for the Rabi season. This is likely to create serious fiscal challenges.

THE WAY FORWARD

• Self-reliant and not depend on import of fertilizers
• Five urea plants at Gorakhpur, Sindri, Barauni, Talcher and Ramagundam are being revived in the public sector.
• Extend the NBS model to urea and allow for price rationalisation of urea compared to non-nitrogenous fertilizers and prices of crops
• Present system of keeping the price of urea fixed and absorbing all the price increases in subsidy needs to be replaced by distribution of price change over both price as well as subsidy based on some rational formula.
• Develop alternative sources of nutrition for plants
• Shift towards the use of non-chemical fertilizers as well as a demand for bringing parity in prices and subsidy given to chemical fertilizers with organic and biofertilizers.This also provides the scope to use a large biomass of crop that goes waste and enhance the value of livestock byproducts
• Pay attention to improving fertilizer efficiency through need-based use rather than broadcasting fertilizer in the field. The recently developed Nano urea by IFFCO shows promising results in reducing the usage of urea.

CONCLUSION

These changes will go a long way in enhancing the productivity of agriculture, mitigating climate change, providing an alternative to chemical fertilizers and balancing the fiscal impact of fertilizer