Press Information Bureau

Government of India

Ministry of Chemicals and Fertilizers

30-November-2012 14:36 IST

Prior to the implementation of Nutrient Based Subsidy (NBS) Policy, the MRP of P&K fertilizers were fixed by the Government, which was much lower than its delivered cost and difference in delivered cost and its MRP was paid as subsidy. This led to increase in consumption of fertilizers but also near stagnation in agricultural productivity. The fertilizer sector worked in a highly regulated environment and the fertilizer industry suffered from low profitability as compared to other sectors. The industry lacked innovation and had no incentive to invest towards modernization and increase efficiency. The subsidy outgo of Government has also increased exponentially.

It was, thus, observed that subsidy regime prior to NBS Policy had been proving to be a losing proposition for all the stake holders viz farmers, industry and the Government. Considering all the issues relating to agriculture productivity, balanced fertilization and growth of indigenous fertilizer industry, competiveness amongst the fertilizer companies and to overcome the deficiency of concession scheme, the Government decided to introduce Nutrient Based Subsidy (NBS) Policy for P&K fertilizers w.e.f. 1.4.2010.

Since, NBS Policy has been under implementation for last two and a half years only, a formal study is yet to be conducted on its impact. However, there is a proposal under consideration to get the study done by a reputed consulting firm.

Urea is made available to the farmers at a price fixed by the Government, which is much below the delivered price. The difference in the cost of delivered price and MRP is provided as subsidy. Government also provides a fixed subsidy on 21 grades of P&K fertilizers, depending on their nutrient content, to make them available to the farmers at subsidised rates. The MRPs of P&K fertilizers are, however, fixed by the companies.

No anomalies regarding prices of fertilizers have come to the notice of the Department.

This information was given by the Minister of State for Chemicals and Fertilisers, Shri Srikant Kumar Jena in a written reply in the Rajya Sabha today.

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DNM/NSK/NV

 

Fertilizer subsidy policy shift to nutrient-based subsidies changed pricing incentives and industry competitiveness. The Government replaced administered MRPs with a Nutrient Based Subsidy (NBS) policy for P&K fertilizers from 1 April 2010 to address distortions where MRPs below delivered cost required large subsidies, suppressed industry incentives, and limited productivity; a formal impact study is proposed. Urea prices remain government-fixed with subsidy covering the gap, while fixed nutrient-based subsidies apply to 21 P&K grades and companies set MRPs; the Department reports no pricing anomalies.