urea-subsidy

Why is it in the news ?

Centre has charted out a plan to ease the restrictions related to the retail prices of the Urea.

  1. The government is in favor of introducing Direct transfer (DBT) of urea subsidy to the beneficiary farmers’ bank accounts in place of existing  DBT to firms based on point of sale.
  2. Previously, neem-coated urea production was mandated to slow down the dissolution of nitrogen into soil, resulting in less nutrient requirement.

Background of Urea Subsidy

  1. The Fertilizer Control Order was passed in 1957 to regulate the sale, pricing, and quality of fertilizer.
  2. In order to regulate the distribution of fertilizer, the Movement Control Order was passed in 1973.
  3. No subsidy was paid on fertilizer before 1977.
  4. The oil crisis in 1973 increased the price of fertilizer leading to a decline in consumption and an increase in food prices.
    1. In 1977, the government subsidized manufacturers.
  5. When the BoP crisis worsened in 1991, the Government decontrolled the import of DAP (di-ammonium phosphate) and MOP (muriate of Potash) in 1992.
    1. But, urea imports continue to be restricted and canalized.

Is there any Urea policy in place in India?

  1. Urea is the primary source of nitrogenous fertilizer and it is heavily subsidized by the Central Government.
  2. As of now,  Urea is the only fertilizer which remains controlled.
  3.  Urea subsidy qualifies as a Central Sector Scheme of the Department of Fertilizers and its finances are totally borne by the Central Government.

The New Urea Policy-2015 (NUP-2015)

  • The Department of Fertilizers came up with a policy in 2015.
  • Objectives
    • Maximization of indigenous urea production
    • Promotion of  energy efficiency in urea production
    • Rationalization of  subsidy burden on the government.
  • Key aspects
    • Existing 25 gas based units come under the purview of this policy.
    • Only those units are eligible for availing Subsidy on production costs which have maintained their production levels beyond a certain production capacity.

Fertilizer industry in India

  1. India is the second largest consumer of urea fertilizers after China.
  2. With respect to production, it ranks third in phosphatic fertilizers whereas the requirement of potash is met through imports.
  3. It features in one of the eight core industries.

 

Type of Fertilisers

Primary

Secondary

Macronutrients

Nitrogenous (Urea)

Phosphatic (DAP)

Potash based (MOP)

Fertilisers that include Ca(Calcium). Mg(Magnesium), and Sulphur (S)

Include Iron, Zinc, Boron, Chloride

 

Nutrient Based Subsidy scheme

  1. A fixed rate of subsidy (in Rs. per Kg basis), is announced by the government  on each nutrient of subsidized P&K fertilizers, namely Nitrogen (N), Phosphate (P), Potash (K) and Sulphur (S).
  2. Currently, 22 fertilizers come under this scheme for which MRP will be decided by considering the factors such as international and domestic prices of P&K fertilizers, exchange rate, and inventory level in the country.
  3. It is not applicable to Urea.