Rationalising Fertiliser Subsidies in India – UPSC GS3

Nutrient Based Subsidy:
  • The government started Nutrient Based Subsidy (NBS)  in 2010 to address the growing imbalance in fertilizer use, which was skewed towards urea (N).
  • However, only non-nitrogenous fertilizers P and K (phosphorus and potassium) were included in NBS.
  • Urea is not covered in this.
What is the need for reforms in the fertilizer sector?
  • It is putting a huge and unsustainable burden of rising fertilizer subsidy bills on the government exchequer
  • Fertilizer subsidy has doubled in a short period of three years between 2017-18 to 2021-22. At present, taxpayers bear 78% of the cost of urea and farmers pay only 22%.
  • To promote the efficient use of fertilizers through the balanced use of N, P, and K (nitrogen, phosphorus, and potassium).
  • To reduce water and air pollution caused by the overuse of urea.
What are the challenges faced in reforming the sector?
  • A huge amount of fertilizer is imported into India due to limited domestic production capacity.
  • International prices of fertilizers are volatile due to:
    • Sharp upsurge in international energy prices, with which fertilizer prices are directly related.
    • Supply constraints in major producing countries due to robust domestic demand, production cuts, and
    • Export restrictions.
    • Cartels of major global energy producers have a strong influence on prices.
What is the way forward?
  • Self-Reliance: We need to be self-reliant and not depend on the import of fertilizers.
  • Extend NBS mode to Urea: We need to extend the NBS model to urea and allow for price rationalization of urea compared to non-nitrogenous fertilizers and prices of crops.
  • Organic Fertilisers: We need to shift towards non-chemical fertilizers like organic and biofertilizers and bring parity in prices and subsidies given to chemical fertilizers with organic and biofertilizers. This also provides the scope to use large biomass of crop that goes waste and enhance the value of livestock by-products.
  • Need based fertilisation: India should pay attention to improving fertilizer efficiency through need-based use rather than using excess fertilizer in the field.
What are the steps already taken by the government?
For being self-reliant, five urea plants are being revived in the public sector. To increase the efficiency of fertilizer use, the recently developed Nano urea by IFFCO shows promising results in reducing the usage of urea.
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