Nutrient Based Subsidy rates for P&K fertilizers

The central government announced that the Nutrient Based Subsidy (NBS) rates for phosphatic and potassic (P&K) fertilizers for this year’s Kharif season which is from April to September 2022 will be increased to Rs 60,939 crore, as against Rs 57,150 crore for the whole of 2021.

Overview:

  • This increase in subsidy will insulate the farmers from the global price increase of di-ammonium phosphate (DAP) and other non-urea nutrients.
  • These soil nutrients are mostly imported.
  • In 2021, the NBS subsidy included Rs 28,655 crore for the Rabi season and Rs 28,495 crore for the Kharif season.
  • In 2020-21, the government also had to hike the NBS subsidy steeply as there was a surge in the prices of imported fertilizers.
  • The new rates of NBS will be applicable from 1st April 2022.

The rise in India’s fertilizer subsidy expenses

An increase in the NBS rates for the Kharif season along with an expected rise in urea subsidy due to elevated prices of LNG and urea in the global markets could raise the country’s fertilizer subsidy expenses in the year 2022-23 to cross Rs 2.2 trillion. In 2021-22, the budgeted fertilizer subsidy stood at Rs 1.6 trillion.

Retail prices of P&K fertilizers

In 2010, the retail prices of P&K fertilizers, as well as DAP, were decontrolled after the ‘fixed-subsidy’ regime was introduced as part of the NBS mechanism. However, the DAP subsidy witnessed an increase to 60 percent of the cost in FY22, from 30 percent previously. The prices have been continuously rising in the global markets even after there was a hike in subsidies. The retail price of muriate of potash (MoP) rose from Rs 18,000/tonne in November to Rs 32,000/tonne. Also, the price of DAP rose to Rs 27,000/tonne from Rs 24,000/tonne in November last year.

An earlier revision of NBS rates

In 2021-22, the central government revised NBS rates for phosphatic fertilizers twice.

Approval of cabinet committee on economic affairs

The cabinet committee on economic affairs (CCEA) has given its approval to a proposal by the fertilizer ministry by providing a subsidy of Rs 2,501 per bag (50 kg) on di-ammonium phosphate for the 2022 Kharif season. The existing subsidy was Rs 1,650 per bag.

Reasons for increasing fertilizer subsidy

The central government took the decision of raising fertilizer subsidies after there was an increase in the prices of crop nutrients in the global markets due to the disruption of the supply chain after Russia’s invasion of Ukraine. The central government is committed to ensuring that there is the availability of P&K fertilizers for the farmers of the country at affordable prices.

Conclusion

With the Russia-Ukraine war affecting the global supply chain, the fertilizer subsidy of India will most likely jump to Rs 2.30 lakh crore in the current fiscal year as against the budget estimate of Rs 1.05 trillion for FY23.

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