Central Idea

The Union Cabinet has approved a fertilizer subsidy of ₹1.08 lakh crore for the ongoing kharif or monsoon season.
₹38,000 crore will be allocated for Nitrogen, phosphatic and potassic (NPK) fertilizers, while ₹70,000 crore will go towards the urea subsidy.

Fertilizer consumption and subsidies

The country’s total consumption of urea is approximately 325 to 350 lakh metric tonnes (LMT).
Other fertilizers sold in the country include 100 to 125 LMT of DAP, 100 to 125 LMT of NPK, and 50 to 60 LMT of Muriate of Potash (MoP).
The fertilizer subsidy per hectare of land is about ₹8,909, and each farmer receives a subsidy of ₹21,223.

DAP: The actual price of a bag of DAP is ₹4,000, but farmers receive it at a subsidized rate of ₹1,350 per bag, with a subsidy of ₹2,461 per bag.
NPK: This subsidy is ₹1,639 per bag, and the MoP subsidy amounts to ₹734 per bag.
Urea: The Centre spends ₹2,196 per bag of urea.

Subsidy as a concept originated during the Green Revolution of the 1970s-80s.
Fertiliser subsidy is purchasing by the farmer at a price below MRP (Maximum Retail Price), that is, below the usual demand-and-supply-rate, or regular production and import cost.
The rate of subsidy is based on the average price of imported fertilizer in the last six months.

The subsidy goes to fertiliser companies, although its ultimate beneficiary is the farmer who pays MRPs less than the market-determined rates.
From March 2018, a new so-called direct benefit transfer (DBT) system was introduced, wherein subsidy payment to the companies would happen only after actual sales to farmers by retailers.
With the DBT system, each retailer — there is over 2.3 lakh of them across India — now has a point-of-sale (PoS) machine linked to the Department of Fertilizers’ e-Urvarak DBT portal.

A popular example of how this system works is that of the neem-coated urea fertiliser.
Its MRP is fixed by the government at Rs. 5922.22 per tonne.
The average cost of domestic production is at Rs 17,000 per tonne. The difference is footed by the centre in the form of subsidy.

The non-urea fertiliser is decontrolled or fixed by the companies.
The non- urea fertilizers are further divided into two parts, DAP (Diammonium Phosphate) and MOP (Muriate of Phosphate).
The government pays a flat per tonne subsidy to maintain the nutrition content of the soil, and ensure other fertilizers are economical to use.

Low NUE: Indian soil has low Nitrogen use efficiency, which is the main constituent of Urea.
Groundwater pollution: Consequently, excess usage contaminates groundwater.
Overuse beyond prescription: The bulk of urea applied to the soil is lost as NH3 (Ammonia) and Nitrogen Oxides. The WHO has prescribed limits been breached by Punjab, Haryana and Rajasthan.
Health hazards: For human beings, “blue baby syndrome” is a common side ailment caused by Nitrate contaminated water.