Revisions in Fertilizer Subsidy Rates: Implications for Indian Agriculture

Introduction:

• The Union Cabinet has recently announced significant changes in the subsidy rates for key fertilizers in India, differentiating between the October-March and April-September periods. This move holds substantial implications for the agricultural sector, particularly in the context of the nutrient-based regime.

Changes in Subsidy Rates:

Nitrogen (N):

• Subsidy reduced by 38% in the October-March period of FY-24.

Phosphorus (P):

• Subsidy lowered by 49%.

Potassium (K):

• Witnessed an 84% reduction in subsidy.

Sulphur (S):

• Subsidy decreased by 32.5% during the same period.

Significance of Fertilizer Subsidies:

• Fertilizer subsidies have played a pivotal role in India’s agricultural landscape since the Green Revolution of the 1970s-80s. This article delves into the concept of fertilizer subsidies, their allocation, and the challenges associated with them.

Understanding Fertilizer Subsidy:

Origins:

• Emerged during the Green Revolution to enhance agricultural productivity.

Subsidized Pricing:

• Involves farmers purchasing fertilizers at prices below the Maximum Retail Price (MRP), often lower than market rates.

Determining Subsidy Rates:

• Influenced by the average price of imported fertilizer over the preceding six months.

Recipient and Payment of Subsidy:

• Fertilizer companies receive the subsidy, ultimately benefiting farmers who acquire fertilizers at rates below market prices through the Direct Benefit Transfer (DBT) system implemented since March 2018.

Neem-Coated Urea Illustration:

• Neem-coated urea serves as an illustrative example, where the central government covers the variance between the fixed MRP and domestic production costs through subsidy disbursement.

Non-Urea Fertilizers:

• Pricing of non-urea fertilizers is determined by companies rather than government intervention. These are categorized into DAP (Diammonium Phosphate) and MOP (Muriate of Phosphate), with a uniform per-tonne subsidy provided to maintain soil nutrition levels.

Challenges Associated with Fertilizer Subsidies:

Low Nitrogen Use Efficiency (NUE):

• Indian soil exhibits low NUE, primarily in Urea, leading to excessive use and groundwater pollution.

Groundwater Contamination:

• Excessive fertilizer application contributes to groundwater contamination.

Overuse:

• Urea application results in losses as NH3 (Ammonia) and Nitrogen Oxides, surpassing WHO-prescribed limits, particularly in Punjab, Haryana, and Rajasthan.

Health Impacts:

• Nitrate-contaminated water poses health risks, including the occurrence of “blue baby syndrome” in humans.

Conclusion:

• Fertilizer subsidies are integral to Indian agriculture, providing crucial support to farmers by reducing the cost of essential inputs. However, the challenges of overuse, groundwater pollution, and associated health concerns necessitate a comprehensive approach to ensure sustainable and responsible fertilizer usage in the country.