Home > Agriculture, Fertiliser > Fertiliser Industry in India: Aftermath of NBS Policy

Fertiliser Industry in India: Aftermath of NBS Policy

While the government has implemented the Nutrient Based Subsidy (NBS) Policy, urea consumption still remains high.

Fertiliser subsidy to farmers was being routed through fertiliser companies on sale of urea in India. With urea cheaply available, farmers tended to overuse it to increase yields. Overuse reduces soil fertility, leading to stagnating yields. Thus, the government planned to implement the Nutrient Based Subsidy (NBS) Policy with effect from April 1, 2010. 
Under NBS, subsidy is given on the basis of the nutrients in the product — nitrogen, phosphorus, potash and sulphur — directly to farmers. This did away with the maximum retail prices at which fertiliser companies were to sell their produce. However, urea continued to be under MRP, the price of which was hiked by 10% from Rs 4,830 to Rs 5,310 a tonne. 

With NBS, the government was hopeful of a more sensible use of urea. However, contrary to expectation, urea consumption continues to remain high. Consumption of urea in kharif 2010 up to July rose to 73.59 lakh tonnes from 68.05 lakh tonnes a year-ago. 

The probable reason for the same are:

  • International prices of raw materials like sulphur, phosphorous and potassium rose substantially since the implementation of policy. Thus, the government’s expectation of increase in use of nutrients other than urea did not materialise.
  • Urea is still the cheapest fertiliser available as its price is capped and those of other nutrients rose after being de-controlled.
  • Also, high support prices given by the government to agricultural crops partially negated the impact of higher urea prices.
  • There still exists ambiguity over how subsidies would be reimbursed to farmers.

Thus, unlike what the government had anticipated, subsidies on fertilisers continue to burden the government’s finances. Higher international prices of fertilisers are also affecting the exchequer as India imports nearly 30-40% of the fertiliser consumed.

Categories: Agriculture, Fertiliser
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