SYLLABUS

GS-3: Issues related to direct and indirect farm subsidies and minimum support prices; issues of buffer stocks and food security.

Context: The Union Cabinet has approved Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) fertilisers for the Rabi 2026–27 season, effective from 1 October 2026 to 31 March 2027.

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• Subsidy outlay: The tentative requirement for Rabi 2026–27 is ₹62,370.02 crore, over 64% higher than the ₹37,952.29 crore for the previous Rabi season.

• Special provisions: DAP will continue to be made available at a fixed price of ₹1,350 per bag, with the provision extended to domestic and imported Triple Superphosphate (TSP) and imported Monoammonium Phosphate (MAP). Freight subsidy for SSP and subsidy for imported and domestically produced ammonium sulphate will also continue.

• Domestic production support: A special package will continue to support domestic manufacturers of sulphur and sulphuric acid, covering 20% of actual procurement cost subject to specified floor prices.

• Objective: The revision takes into account international fertiliser and input prices to ensure affordable fertiliser availability during the Rabi season.

Understanding Nutrient Based Subsidy (NBS) Scheme

• Introduction: Introduced on 1 April 2010 for Phosphatic and Potassic (P&K) fertilisers.

• Subsidy mechanism: Under the scheme, fertiliser subsidies are linked to their nutrient content. These nutrients include Nitrogen (N), Phosphorus (P), Potassium (K) and Sulphur (S).  The subsidy rates for these nutrients are determined twice a year, for the Kharif and Rabi seasons.

• Coverage: Covers 28 grades of P&K fertilisers, expanded from the initial 25 grades by adding three grades from Kharif 2024.

• Pricing mechanism: Operates under a decontrolled pricing regime in which manufacturers and importers determine the Maximum Retail Price (MRP), subject to Government oversight and prescribed reasonable profit margins.

• Institutional mechanism: The Department of Fertilisers determines subsidy rates based on recommendations of the Inter-Ministerial Committee. Subsidy is provided to fertiliser companies and passed on to farmers through subsidised retail prices.

• NBS vs Urea subsidy: P&K fertilisers are covered under NBS, whereas urea operates under a separate subsidy and price-control mechanism, with its MRP notified by the Government.

Significance of NBS Rate Revision

• Protection against global price volatility: International fertiliser and raw-material prices are influenced by geopolitical tensions and trade disruptions. Revision of subsidy rates helps cushion farmers against the impact of these fluctuations.

• Farmer affordability: The subsidy and special provisions, particularly the DAP price support, help maintain access to essential fertilisers at subsidised and reasonable prices.

• Domestic production and supply security: Continued support for domestic sulphur and sulphuric acid manufacturers, along with special provisions for key fertilisers, supports domestic production and reduces vulnerability to external supply disruptions.

• Agricultural continuity and food security: Adequate fertiliser availability during the Rabi season supports timely agricultural operations, farm incomes and the stability of food production.

Fertiliser Sector in India

• Domestic production: Domestic production of DAP and NPKS fertilisers increased by over 50%, from 112.19 LMT in 2014 to 168.55 LMT in 2025. 

• Import dependence: India remains dependent on imports of urea and phosphatic fertilisers. Muriate of Potash (MOP) has no reported domestic production and is entirely import-dependent. 

• Major fertilisers and nutrient composition: Urea is a nitrogenous fertiliser containing approximately 46% nitrogen; DAP supplies nitrogen and phosphorus (18:46:0); MOP is a major source of potassium; and SSP supplies phosphorus, sulphur and calcium.

• Regulation and distribution: The Fertiliser Control Order (FCO), 1985 regulates fertiliser quality and specifications, while the Essential Commodities Act, 1955 provides for regulation of supply and distribution.