Tinkering at Margins

Context:  Nutrient-based subsidy (NBS) regime for fertilisers was instituted over a decade ago but has failed to provide expected results.

Problems with NBS

• Worsening Fertilizer Imbalance: Since the price of urea is controlled, leading to lower prices (compared to decontrolled fertilisers) and increased consumption.

• Urea consumption rose from 26.7 million tonnes (mt) to 33.7 mt between 2009-10 and 2019-20.

• Urea’s share in overall fertiliser consumption increased from below half to 54.6% during the same period.

• Governmental Issues: Non-revision of Maximum Retail Price (MRP) of urea since last six and a half years. While the prices of urea increased hardly by 11%, prices of other fertilisers increased by 2.5 to 4 times.

Steps taken by the government to addresses the issue of diversion of urea to bulk buyers and traders.

• Compulsory neem-coating for urea

• Conditional fertiliser subsidy payment to companies only after  actual sales to farmers being registered

• Plans of capping of fertiliser bags per farmer.

Way forward:  

• Short term changes:

• Bring in urea under NBS: By gradually hiking its MRP to Rs 10,000 

• Make other fertilisers cheaper: By  reducing the NBS rates of phosphorus, potash and sulphur 

• Long term: Replace NBS by flat per-acre cash subsidy, that can be used to purchase any fertiliser and includes value-added and customised products.