SYLLABUS

GS-3: Issues related to direct and indirect farm subsidies and minimum support prices.

Context: Recently, the Union Cabinet has approved the Nutrient-Based Subsidy (NBS) rates for the Kharif Season 2026 (1 April 2026 – 30 September 2026) on Phosphatic and Potassic (P&K) fertilizers.

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• The government has increased subsidy rates by around 12% for Kharif 2026 to offset rising international fertilizer prices driven by geopolitical disruptions such as the West Asia crisis. 

• Revised per kg subsidy rates are ₹47.32 for Nitrogen (N), ₹52.76 for Phosphorus (P), ₹2.38 for Potash (K) (unchanged), and ₹3.16 for Sulphur (S), applicable to P&K fertilizers including DAP, MOP, and NPKS complexes. 

Rationale for Revision of NBS Rates

• Global Price Volatility: Rising international prices of key inputs such as DAP, MOP, urea, and sulphur, coupled with supply disruptions due to geopolitical tensions, necessitated subsidy revision.

• Farmer Protection: The government acts as a price shock absorber to shield farmers from fluctuations in global fertilizer markets.

• Balanced Fertilization Imperative: The revision aims to address declining crop productivity and correct soil nutrient imbalance caused by excessive urea usage.

• Food Security Concerns: Ensuring adequate and stable fertilizer availability is essential to sustain agricultural output and national food security.

• Subsidy Rationalisation: The adjustment aligns subsidy levels with global trends while maintaining fiscal prudence.

Key Benefits of NBS Revision

• Affordable Access: Ensures fertilizers are available to farmers at subsidized and reasonable prices.

• Balanced Nutrient Use: Promotes the application of Nitrogen (N), Phosphorus (P), Potash (K), and Sulphur (S) in appropriate proportions.

• Soil Health Improvement: Encourages the use of secondary and micronutrient-enriched fertilizers to restore soil fertility.

• Farmer Empowerment: Enables farmers to make informed choices based on crop needs and soil conditions.

• Market Efficiency: Fosters competition among fertilizer companies while promoting innovation and product diversification.

• Supply Stability: Ensures the timely availability of fertilizers during the critical Kharif season.

About the Nutrient-Based Subsidy (NBS) Scheme

• The Government of India introduced the Nutrient-Based Subsidy (NBS) Scheme on 1 April 2010 for phosphatic and potassic (P&K) fertilizers. 

• Under NBS, a fixed subsidy is provided based on nutrient content (per kg of Nitrogen (N), Phosphorus (P), Potassium (K), and Sulphur (S)), covering fertilizers like DAP and NPKS grades. 

• Subsidy rates are revised annually or biannually. 

• Coverage and Scope: The scheme covers 28 grades of P&K fertilizers, including DAP, MAP, MOP, TSP, SSP, complex fertilizers, and micronutrient-fortified variants.

• Pricing and Market Structure: It operates under a decontrolled regime where companies fix MRP (market-linked pricing) while the government monitors prices to prevent excessive increases.

• Subsidy Mechanism: Subsidy is paid to manufacturers and importers, which is then passed on to farmers through reduced retail prices.

• Institutional Mechanism: Subsidy rates are determined by the Department of Fertilizers based on recommendations of the Inter-Ministerial Committee (IMC).

• Distribution and Regulation: Fertilizer movement is tracked through the Fertilizer Monitoring System, with partial control under the Essential Commodities Act, 1955, and imports allowed under the Open General License.

 About the Fertilizers

• Fertilizers are concentrated plant nutrients made from inorganic chemicals, used to supply essential elements required for proper plant growth.

• They contain nutrients in higher concentrations than organic manure, are applied in smaller quantities, and are readily available for plant uptake, though some may be lost through leaching or runoff.

• Based on composition, fertilizers are classified as sole fertilizers, mixed fertilizers, and micronutrient fertilizers.

• Current Fertilizer Scenario in India:

• India is the second-largest producer and consumer of fertilizers globally, after China.
• It is one of the country’s eight core industries.
• India produces key fertilizers such as Urea, DAP (Diammonium Phosphate), NP and NPK Complex Fertilizers, Ammonium Sulphate, Potash, and Single Super Phosphate (SSP). 
• Around 87% of urea consumption is domestically met.
• 90% of NPK Fertilizers are also produced within the country.
• However, for DAP, only about 40% comes from local production.
• In the case of Muriate of Potash (MOP), 100% is still imported.

About the Balanced Fertilization

• Balanced fertilization refers to the application of all essential plant nutrients, macronutrients and micronutrients, in appropriate proportions, quantities, timing, and methods based on crop needs, soil fertility, and climatic conditions.

• It aims to enhance fertilizer use efficiency, improve crop productivity, sustain soil health, and reduce environmental impacts such as nutrient losses and emissions.

• The concept is guided by Justus von Liebig’s Law of the Minimum and goes beyond the traditional NPK-focused approach to a holistic nutrient management system.

Sources:
PIB
PM India
Sansad
PIB