Fertiliser Subsidy

Why in News?

• Recently, High government subsidies are leading to excessive use of two fertilisers – Urea and Di-Ammonium Phosphate (DAP).

Highlights

• A fertiliser is a natural or artificial substance containing chemical elements (such as Nitrogen (N), Phosphorus (P) and Potassium (K)) that improve growth and productiveness of plants.
• There are 3 basic fertilisers in India – Urea, DAP and Muriate of Potash (MOP).
• The government pays a subsidy to fertiliser producers to allow farmers to buy fertilisers at below-market rates.
• The difference between the cost of production/import of a fertiliser and the actual amount paid by farmers is the subsidy portion borne by the government.
• urea is the most produced, imported, consumed and physically regulated fertiliser of all. It is subsidised only for agricultural uses.
• The Centre pays a subsidy on urea to fertiliser manufacturers on the basis of cost of production at each plant and the units are required to sell the fertiliser at the government-set Maximum Retail Price (MRP).
• The MRP of urea is currently fixed at Rs 5,628 per tonne.
• The MRPs of non-urea fertilisers are decontrolled or fixed by the companies.
• But the government has, in recent times, and especially with the global price surge post the Russia-Ukraine war, brought these fertilisers under the control regime.
• All Non-Urea based fertilisers are regulated under Nutrient Based Subsidy (NBS) Scheme.
• Examples of non-urea fertilisers – DAP and MOP.
• Companies do not sell DAP at more than Rs 27,000 per tonne
• The high subsidy on urea and DAP makes them much cheaper for farmers relative to other fertilisers.
• While urea is retailing at a fourth of the price of packed common salt, DAP has also become far cheaper than other fertilizers.
• The prices of the other fertilizers which were decontrolled have gone up which has led the farmers to use more urea and DAP than before.
• The use of N, P and K in the country has over the last few years sharply deviated from the ideal NPK use ratio of 4:2:1.
• Urea and DAP contain more than 30% of any single nutrient.
• Urea has 46% N, while DAP has 46% P and also 18% N.
• The resulting nutrient imbalance owing to their use, disproportionate to other, more expensive fertilisers, could have implications for soil health, ultimately affecting crop yields.