Nutrient Based Subsidy Scheme: Features, Importance & More - UPSC Notes

The Nutrient Based Subsidy Scheme provides subsidies for all non-urea-based fertilizers. The NBS scheme was established to promote fertilisation of the soil in a balanced manner to boost agricultural output and improve farm returns. Under the plan, each grade of subsidised Phosphatic and Potassic (P&K) fertilisers, except for Urea, receives a fixed level of subsidy determined annually, depending on their nutritional content. The Maximum Retail Price (MRP) of fertilisers has been left open under this plan, and manufacturers/marketers can set it at a suitable amount. 

This topic Nutrient Based Subsidy Scheme UPSC is important for the UPSC Prelims syllabus and GS Paper 3 under UPSC Mains Syllabus, considering India's significant impact on agriculture.

This article on Nutrient Based Subsidy Scheme UPSC is curated by the Testbook UPSC Online Coaching team, and we will discuss the Objectives, Features, Issues, and Importance of Nutrient Based Subsidy Scheme. Keep reading to get complete information on this topic.

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What is the Nutrient Based Subsidy NBS scheme?

The Government of India has implemented the nutrient based fertilizer subsidy scheme in India since April 1, 2010. The policy covers 22 deregulated fertilizer grades, including DAP, MAP, TSP, DAP Lite, MOP, SSP, Ammonium Sulphate, and 15 other complex fertilizer grades. Farmers receive these fertilizers at subsidized rates, determined by the nutrients (N, P, K, and S) they contain. According to the Fertilizer Control Order, additional subsidies are provided for fertilizers enriched with secondary and micronutrients like boron and zinc. The subsidies offered to enterprises are determined on an annual basis, taking into account the nutritional content of the fertilizers.

Learn about MUDRA Yojna here.

Objectives of the Nutrient Based Subsidy NBS Scheme

The objectives are to ensure the availability of essential nutrients to farmers at affordable prices, promote balanced fertilization, and improve nutrient use efficiency. It also aims to reduce the subsidy burden on the government and support the sustainable growth of the agriculture sector.

• The Nutrient Based Subsidy Scheme was created to encourage balanced soil fertilisation, which would result in increased agricultural productivity and, as a result, improved farmer returns.
• The scheme aims to ensure farmers have access to a sufficient supply of P&K at statutory fixed costs to support agricultural growth and ensure balanced soil nutrient application.
• Its objectives include maintaining balanced fertiliser use, improving agricultural productivity, encouraging the growth of the local fertiliser sector, and reducing the subsidy load.

Learn more about the Fertilizer policy in India!

The NBS Scheme works by granting fertilizers manufacturers fixed subsidies according to the fertilizer's nutrient content-per-nutrient basis of nitrogen, phosphorus, potash, and sulfur. Those subsidies are then transferred directly to the manufacturers.

They sell the fertilizers at market-determined prices, ensuring availability and affordability for farmers.

• Farmers who cultivate notified crops in notified areas can benefit from the scheme.
• Subsidy rates are determined by the government based on the nutrient content of fertilizers and are adjusted periodically according to market conditions.
• A subsidy sum is paid to fertilizer manufacturing units which then sell the fertilizers to farmers at a reduced price.
• The government ensures that the fertilizers sold under the scheme meet the quality standards specified by the Bureau of Indian Standards (BIS).
• The scheme is implemented under the monitoring of the government to make sure the advantages are given to intended beneficiaries.
• Information regarding the scheme is disseminated to farmers through a variety of ways, which include print and electronic media, agricultural extension officers, and mobile applications.
• The government does awareness campaigns to make the agricultural population aware of the importance of balanced utilization of fertilizers, soil health management, and diversification of crops.

Learn more about the One nation one fertiliser scheme!

Features of the Nutrient Based Subsidy Scheme for Fertilizers

Key features include the following:

• The Department of Fertilizers in the Ministry of Chemicals and Fertilizers is responsible for looking after the program.
• The Cabinet Committee on Economic Affairs has accepted the Department of Fertilizers’ proposal to keep the Nutrient Based Subsidy (NBS) in place for the 2019-20 fiscal year.
• Farmers will have access to an adequate supply of P&K at a regulated price if the Nutrient-Based Subsidy Scheme is maintained.
• The Nutrient-Based Subsidy Scheme saw no adjustments in the Union Budget 2021.
• In India, urea is the only regulated fertiliser, and it is sold at a legally notified uniform retail price.
• The Nutrient Based Subsidy Scheme (NBS) allows phosphoric and potassium fertiliser manufacturers, marketers, and importers to determine fair MRPs.
• It takes into consideration the pricing of domestic and international P&K fertilizers, the levels of inventory within the country, and the exchange rate for currency in order to calculate the MRP.

Learn more about the Fertilizer Industry in India!

The Nutrient Based Subsidy (NBS) Scheme holds the following significance:

• Encourages a proper blend of nutrients leading to healthier soils and higher yields.
• It reduces overall government expenditure on subsidy by linking it to nutrient content instead of blanket subsidy rates.
• This ensures that fertilizers are used efficiently with minimal loss to the environment since they are being targeted toward the nutrient requirements of the crops.
• It has a preference for pricing mechanisms that work well in the market, thus encouraging competition among fertilizer manufacturers, which leads to improved quality products and services.
• Contributes to long-term agricultural sustainability by promoting practices that maintain soil fertility and reduce adverse environmental effects.
• Streamlines subsidy payments directly to manufacturers, ensuring timely availability of fertilizers and minimizing administrative delays.
• Encourages the development and use of customized fertilizers tailored to specific crop and region needs, enhancing productivity.

Learn more about the Physical and Social Environment in Crop Distribution!

Issues Related to Nutrient Based Subsidy (NBS) Scheme

The goal of the NBS programme was to encourage balanced fertiliser use, which would increase soil health while lowering government fertiliser support costs. So far, the policy still needs to fulfil its first goal of enhancing soil health. The reason for this is that Urea prices are skewed toward low prices.

Some of the issues related to the NBS Scheme are discussed below:

• Subsidised urea is diverted to bulk buyers/traders and non-agricultural users, including plywood and animal feed manufacturers.
• It’s being trafficked into Bangladesh and Nepal, among other places.
• Experts attribute the distortion to the incomplete NBS system. The problem is caused by the quick rise in phosphate and potassium prices and the price control of urea.
• In the long run, this mismatch in fertiliser utilisation is a terrible omen for agricultural output.
• Outside of NBS, urea is still subject to price controls, and NBS has only been used in other fertilisers.
• Over the last ten years, deregulated fertilizer prices (other than urea) have increased by 2.5 to four times. However, the price of urea has hardly increased by 11% since April 2010.
• As a result, farmers are using more urea than previously, exacerbating the fertiliser imbalance.
• Because fertiliser subsidies are the second-largest subsidy after food subsidies, the NBS policy harms the economy’s budgetary health and the country’s soil health.

Learn more about Agroecology and Cropping Patterns!

NBS Scheme and Urea

Urea is a white crystalline solid that contains 46 per cent nitrogen and is used as an animal feed additive and fertilizer. It has multiple applications, including its use in cropping, as a cattle feed supplement, and in various industries such as plastics production.

Currently, urea is not included in the Nutrient-Based Subsidy Scheme. However, the Indian government plans to incorporate urea into the scheme before implementing Direct Cash Transfer (DCT) of urea subsidy to farmers' accounts. The subsidy rate for urea will be determined based on factors like soil health and the size of landholdings. In 2012, a committee led by Sharad Pawar recommended the inclusion of urea under the NBS.

The government regulates urea prices and determines the Maximum Retail Price (MRP). The urea subsidy is defined as the difference between the delivered cost of fertilizers at the farm gate and the net market realization by urea manufacturers/importers provided by the Government of India. Urea is currently covered under the New Pricing Scheme.

Key Takeaways on Nutrient Based Subsidy Scheme for UPSC Aspirants Goals: The Nutrient-based Subsidy (NBS) scheme would promote balanced use of fertilizers, increase productivity in agriculture, and reduce the fiscal burden on fertiliser subsidies by fixing subsidy rates according to nutrient content. Implementation: Commencing from April 2010, the subsidy scheme initiated by the Government of India has allowed fertilizer companies to avail the subsidies based on the nutrient components of fertilizer such as nitrogen, phosphorus and potash and sulphur. Balanced Fertilization: The scheme motivates farmers to apply fertilizers based on soil health and nutrient status, thereby supporting sustainability in agriculture. Market-Based Pricing: Under NBS, the government subsidizes fertilizers while allowing market forces to determine retail prices. This aims to ensure the availability of fertilizers while promoting efficient usage.

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