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Fertilizer Subsidy

IAS Current Affairs

Fertilizer Subsidy

Source: Indian Express
GS III: Issues related to direct and indirect farm subsidies

Overview

  1. News in Brief
  2. Reason for the fertiliser subsidy burden
  3. Government’s response

Why in the News?

India’s fertilizer cost is likely to rise due to global supply crunch, which results in subsidy burden.

News in Brief
  • The Department of Fertilizers has sought a substantial increase in subsidy allocation as global prices of urea, DAP, and other fertilizers continue to rise.
  • India, heavily dependent on imports of fertilizers and natural gas, faces higher procurement costs due to disruptions in global supply chains.
  • The subsidy burden may exceed rupees 3 lakh crore, far above the budget estimate of rupees 1.7 lakh crore for FY 2026-27.
Reason for fertilizer subsidy burden
  • Supply chain disruptions due to conflicts in West Asia.
  • Rising international prices of urea and DAP.
  • Increased cost of natural gas, a key input for urea production.
  • Heavy dependence on imported fertilizers and raw materials.
Government’s Response
  • The government is inviting global suppliers to participate in tenders for fertilizer supply, ensuring adequate availability during the sowing season.
  • India is diversifying import sources and exploring additional supplies from Russia and other countries, to secure fertilizers at competitive prices and reduce dependence on a few suppliers.
  • The government is expanding domestic fertilizer production capacity to reduce import dependence and improve self-sufficiency.
  • Despite rising costs, the government is maintaining subsidy support so that fertilizer prices remain affordable for farmers, thereby safeguarding agricultural production and food security.

What is Fertilizer Subsidy?

  • A financial support provided by the Government of India to make fertilizers available to farmers at affordable prices.
  • The government bears a part of the cost of production or import, allowing farmers to purchase fertilizers at lower prices.
  • It is India’s second-largest subsidy after food, often exceeding rupees 2 lakh crore annually.
  • Objectives
        • Ensure affordable access to fertilizers for farmers.
        • Increase agricultural productivity.
        • Support food security.
        • Protect farmers from fluctuations in global fertilizers prices.

 

Significance

  • Ensures availability of fertilizers during the crucial agricultural season.
  • Protects farmers from steep increases in input coasts.
  • Supports food security and agricultural productivity.
  • Helps stabilize rural incomes and crop production.

Key Concerns

  • Rising fiscal burden on the government.
  • Increased pressure on the fiscal deficit.
  • Continued vulnerability to global supply-chain disruptions.
  • Fertilizer was one of the 3F’s (Fuel, Fertilizer, Foreign Exchange) cited by Finance Minister Nirmala Sitharaman.
        • This requires close monitoring because all are largely imported and paid for in foreign currency, and  the rising imports might put pressure on Indian rupee especially during geopolitical tensions and supply chain disruptions.

Government Initiatives

  • Integrated Fertilizer Monitoring System(iFMS) – Tracks the movement of subsidized fertilizers across the country.
  • PM-PRANAM (PM Programme for Restoration, Awareness Generation, Nourishment and Amelioration of Mother Earth), 2023 – Incentivizes states to reduce consumption of chemical fertilizers.
  • Pradhan Mantri Bhartiya Janurvarak Pariyojana (PMBJP) – One Nation One Fertilizer, Fertilizers are marketed under the single brand “Bharat” (e.g., Bharat Urea, Bharat DAP).
  • Direct Benefit Transfer (DBT) in Fertilizers, 2018- Subsidy is released to companies only after fertilizers are sold to farmers through PoS device.
          • Enhances transparency and reduces leakages.

 

UPSC Prelims Practice Question

Consider the following statements regarding PM-PRANAM

  1. It aims to reduce the excessive use of chemical fertilizers.
  2. It provides incentives to states that lower chemical fertilizer consumption.
  3. It is implemented by the Ministry of Rural Development.

Which of the statements given above are correct?

a)1 and 2 only

b) 2 and 3 only

c) 1 and 3 only

d) 1.2 and 3

Answer: a) 1 and 2 only

Explanation:  The scheme is linked to Department of Fertilizers , Ministry of Chemicals and Fertilizers.

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