Why in news?
Union Cabinet recently approved significant fertiliser subsidies under the Nutrient Based Subsidy (NBS) scheme to support farmers during the Rabi 2025-26 season. This move ensures affordable access to phosphatic and potassic (P&K) fertilisers amid global price fluctuations. The overall fertiliser subsidy bill for FY26 is projected to rise substantially.
What is Fertiliser Subsidy?
- Definition: Government pays fertiliser producers the difference between cost of production/import and the Maximum Retail Price (MRP) charged to farmers.
- Objective: Ensure affordable access to soil nutrients, boost agricultural productivity, and support food security.
Subsidy Mechanism
- Urea is sold at a fixed Maximum Retail Price (MRP) of around ₹242 per 45-kg bag, with the government reimbursing manufacturers for the difference between production/import costs and this price.
- Phosphatic (P) and potassic (K) fertilisers operate under the Nutrient-Based Subsidy (NBS) regime since 2010, where subsidies are fixed per nutrient unit (N, P, K, S), allowing market-driven retail prices.
- Direct Benefit Transfer (DBT), rolled out since 2016, releases 100% subsidy to companies based on PoS-verified sales to farmers, reducing leakages.​
Recent Reforms
- Prime Minister Narendra Modi's government has boosted NBS allocations to ₹54,310 crore in 2024-25 from ₹45,000 crore budgeted, ensuring supply stability.
- Initiatives like nano-urea promotion and precision farming aim to cut subsidy needs by enhancing efficiency.
- Calls grow for uniform NBS across all fertilisers or direct per-acre cash transfers to enable balanced, customised nutrient use.​
Challenges
- Overuse of Urea & DAP: Distorts nutrient balance, depletes soil health.
- Leakages & Diversion: Subsidised fertilisers diverted to non-agricultural uses or grey market.
- Fiscal Burden: Rising global prices and import dependence inflate subsidy bill.
- Environmental Impact: Excess nitrogen leads to water pollution, greenhouse gas emissions.
- Inequity: Larger farmers benefit more; small/marginal farmers get less relative support.
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