Govt to shift to nutrient-based subsidy regime

Focus on nitrogen, phosphorus, potassic content of fertiliser formulations

Finance Minister Pranab Mukherjee today took note of the diminishing response of Indian soils to added fertilisers in terms of increase in crop yield and announced measures to correct this anomaly by ensuring balanced use of fertiliser nutrients.

“The government intends to move towards a nutrient-based subsidy regime instead of the current product-pricing regime,” Mukherjee said in his Budget speech. This move had actually been initiated last year by the United Progressive Alliance (UPA) government in its previous tenure and is now sought to be formalised by making it a part of the Budgetary proposals.

It essentially means subsidy on actual nitrogen (N), phosphorus (P) and potassic (K) content of different fertiliser formulations, rather than blanket subsidy on the whole fertiliser product irrespective of the nutrient status.

The old system encouraged excessive use of nitrogenous fertilisers, notably urea, and reduced application of phosphatic and potassic fertilisers. This has resulted in imbalance in the use of N, P and K, resulting in lower soil fertility. With nutrient-based subsidy, the farmers will go in for the use of all nutrients according to the requirement of the soil and the crop.

The finance minister hoped that nutrient-based subsidy would also result in the availability of innovative fertiliser products in the market at reasonable prices. According to fertiliser industry circles, the manufacturers will now have an incentive to produce fertilisers fortified even with micronutrients, such as zinc, sulphur, manganese and the like, which are becoming scarce in Indian soils because of the use of relatively purer forms of chemical fertilisers. This will improve the fertility of the soils, showing up in higher crop yields.

Under the old system, the manufacturers of fertilisers like single super phosphate (SSP), which also has sulphur in it, were at a disadvantage because they were not compensated for the sulphur content in their product. About 40 per cent of the Indian soils are deficient in sulphur and need addition of this micronutrient for optimum crop yield, the industry sources said.

The finance minister expressed the hope that the unshackling of the fertiliser manufacturing sector would attract fresh investment in this industry. Industry sources pointed out that the unrealistic subsidy regime and delayed payment of the subsidy had made this sector unattractive for investors. No major fresh investment had come in this sector in the past 10 years or so.

The finance minister also reiterated the government’s resolve to move towards a system of direct transfer of fertiliser subsidy to the farmers. At present, the subsidy is routed through the fertiliser industry.

The proposal for direct payment of subsidy to the farmers was first mooted in last year’s Budget speech. The then finance minister, P Chidambaram, had also announced that the new system would be tried out on a pilot basis in the selected areas. However, not much headway has so far been made in this direction, industry sources pointed out.