Recently, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, approved the proposal put forward by the Department of Fertilizers for setting the Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) Fertilizers for the fiscal year 2019-20. The CCEA has a significant responsibility in shaping economic policies, including foreign investments, to ensure a balanced economic progression for the nation.
The Role of the Cabinet Committee on Economic Affairs (CCEA)
The CCEA plays a vital role in determining public sector investment priorities. It deliberates upon individual investment proposals amounting to no less than Rs. 3 Billion, a figure that has been adjusted over time. Not only does it continuously review economic trends, but also the associated issues and prospects with the intent of formulating a consistent and integrated economic policy framework for the country.
The Nutrient-Based Subsidy (NBS) Rates for 2019-20
The newly approved NBS rates are Rs 18.90 per kg for Nitrogen (N), Rs 15.21 per kg for Phosphorus (P), Rs 11.12 per kg for Potash (K), and Rs 3.56 per kg for Sulphur (S). The estimated subsidy expenditure for P&K Fertilizers for 2019-20 is set to be Rs. 22875.50 crore.
An Insight into Government Subsidies on Fertilizers
As part of its farmer-friendly approach, the government ensures the provision of fertilizers, Urea and 21 grades of P&K fertilizers at subsidized rates to farmers via manufacturers/importers. The subsidy on these fertilizers has been regulated by the NBS Scheme since 2010.
| Nutrient | Rate (INR/Kg) |
|---|---|
| Nitrogen (N) | 18.90 |
| Phosphorus (P) | 15.21 |
| Potash (K) | 11.12 |
| Sulphur (S) | 3.56 |
The Nutrient Based Subsidy (NBS) Scheme: An Overview
Instituted in April 2010 by the Department of Fertilizers, Ministry of Chemicals & Fertilizers, the NBS offers a predetermined annual subsidy on each grade of subsidized P&K fertilizers based on their nutrient content.
Analysis of the NBS Scheme
The NBS scheme’s primary objective was to deregulate non-Urea fertilizer subsidies, thereby reducing the fiscal burden. However, it led to a reduction in soil nutrient quality and price hikes. Furthermore, there was an unfavorable shift in the fertilizer mix. The recommended Nitrogen (N): Phosphorous (P): Potassium (K) ratio of 4:2:1 was skewed to 8.2:3.2:1 in 2013-14. This improper use of fertilizers resulted in considerable environmental damage in many states.
Fertilizer Subsidy: Impact and Way Forward
As the second largest subsidy, following food subsidy, inaction on regulating the fertilizer subsidy has negative implications not just economically but also for the country’s soil health. With fertilizer prices influenced by international petroleum prices, to reduce the subsidy bill, it’s imperative to lessen import reliance and boost domestic production. To achieve this, policy frameworks enriching domestic fertilizer production are needed, along with changes in fertilizer use patterns.
