Tinkering at Margins

The Indian Express     19th October 2020     Save    

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.