Why in news
- The national fertilizer subsidy bill faces fiscal strain despite falling global urea prices due to steep price spikes in imported Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP).
What is the Fertilizer Subsidy Framework?
- Urea is covered under a statutory price control system (New Urea Policy) where the Centre fixes the Maximum Retail Price (MRP) and reimburses manufacturing/import cost differences.
- Phosphatic and Potassic (P&K) fertilizers, including DAP and MOP, are governed by the **Nutrient Based Subsidy (NBS)** regime introduced in 2010, where a fixed annual subsidy per kg of nutrient (N, P, K, S) is announced while MRPs are deregulated.
Key Drivers of Subsidy Strain
- Global urea prices have plunged, lowering raw domestic import bills for nitrogenous fertilizers.
- Surging international spot prices for raw rock phosphate, phosphoric acid (DAP inputs), and potassium chloride (MOP) have completely offset urea savings, increasing total exchequer outflow under NBS.
Why it matters
- Highlights India's heavy import reliance for potassic (100% imported) and phosphatic raw materials, exposing agricultural fiscal management to global supply chain disruptions.
- Fiscal imbalance threatens the Union budget target for fertilizer subsidies in FY27, impacting rural expenditure flexibility.
Key terms
Nutrient Based Subsidy (NBS)
A subsidy scheme where government provides a fixed amount of subsidy annually on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers based on nutrient content.
Muriate of Potash (MOP)
A potassium-rich agricultural fertilizer composed primarily of potassium chloride, almost entirely imported by India.
Prelims facts
- India imports nearly 100% of its Muriate of **Potash (MOP)** requirements.
- Under NBS, MRP of non-urea fertilizers is decided by fertilizer companies, whereas Urea MRP is statutorily fixed by government.
Mains discussion
- Evaluate the fiscal burden of chemical fertilizer subsidies on government finance and discuss measures to promote balanced plant nutrition.
Source: LiveMint
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2015 · Q5 · GS III · 12 marks
In what way could replacement of price subsidy with direct benefit Transfer (DBT) change the scenario of subsidies in India? Discuss. -
2023 · Q99 · General Studies · 2 marks
Consider the following heavy industries : 1. Fertilizer plants 2. Oil refineries 3. Steel plants Green hydrogen is expected to play a significant role in decarbonizing how many of the above industries? -
2020 · Q94 · General Studies · 2 marks
With reference to chemical fertilizers in India, consider the following statements: 1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government. 2. Ammonia, which is an input of urea, is produced from natural gas. 3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries. Which of the statements given above is/are correct?