Understanding subsidy on fertilizers in India

Urea is provided to the farmers at a statutorily notified Maximum Retail Price (MRP). The MRP of 45 kg bag of urea is Rs. 242 per bag (exclusive of charges towards neem coating and taxes as applicable). The difference between the delivered cost of urea at farm gate and net market realization by the urea units is given as subsidy to the urea manufacturer/importer by the Government of India. Accordingly, all farmers (including poor and marginal farmers) are being supplied urea at the subsidized rates.

Further, the Government has implemented Nutrient Based Subsidy Policy from 1st April 2010 for Phosphatic and Potassic (P&K) Fertilizers. Under the policy, a fixed amount of subsidy, decided on annual basis, is provided on subsidized P&K fertilizers depending on their nutrient content. Under this policy, MRP is fixed by fertilizer companies as per market dynamics at reasonable level which is monitored by the Government. Accordingly, any farmer, including poor and marginal farmers, who is buying these fertilizers is getting benefit of subsidy.            

As per the final report prepared by Agricultural Development and Rural Transformation Centre (ADRTC), Bengaluru, Neem Coated Urea has led to:

(i)    Improvement in soil quality.

(ii)   Decrease in cost of pest & disease control and weed management.

(iii)  Improvement in the yield of all crops and their by-products.

(iv)  Highest incremental income in case of tur, followed by sugarcane, soybean, paddy, jute and maize crops.

(v)   Diversion of normal urea to other than crop production purposes has completely stopped post introduction of Neem Coated Urea(NCU).