Background and Objective
The Nutrient-Based Subsidy Scheme, commonly known as NBS, was introduced in April 2010 to regulate subsidies on phosphatic and potassic fertilisers.
Under the scheme, the government provides a fixed amount of subsidy according to the quantity of nutrients contained in each fertiliser.
Its objectives are to:
- ensure adequate availability of fertilisers;
- promote balanced nutrient application;
- improve agricultural productivity;
- encourage competition among fertiliser manufacturers;
- reduce excessive dependence on a few fertiliser products.
The scheme is administered by the Department of Fertilisers under the Ministry of Chemicals and Fertilisers.
Working of the Scheme
The government announces a per-kilogram subsidy rate for four major nutrients:
- Nitrogen
- Phosphorus
- Potassium
- Sulphur
The subsidy available for a fertiliser is calculated according to the proportion of these nutrients present in it.
For example, a fertiliser containing higher quantities of phosphorus and potassium receives subsidy according to the notified rates for those nutrients.
The subsidy is provided to fertiliser manufacturers and importers so that fertilisers can be supplied to farmers at affordable prices. Subsidy payments are linked with actual retail sales recorded through point-of-sale devices.
Nutrient subsidy rates are reviewed periodically in light of:
- international fertiliser prices;
- raw-material costs;
- exchange-rate movements;
- domestic availability;
- fiscal considerations.
Fertilisers Covered
The scheme mainly covers phosphatic and potassic fertilisers, including:
- Di-Ammonium Phosphate;
- Muriate of Potash;
- Single Super Phosphate;
- complex nitrogen–phosphorus–potassium fertilisers;
- other notified fertilisers containing eligible nutrients.
Urea is not covered under the Nutrient-Based Subsidy Scheme. It continues to be regulated through a separate subsidy and price-control framework.
Manufacturers of phosphatic and potassic fertilisers are generally permitted to determine retail prices according to market conditions, although the government monitors prices to ensure affordability and prevent unreasonable increases.
Importance and Limitations
The scheme links subsidy to nutrient content rather than providing the same support to every fertiliser product. It can therefore encourage manufacturers to produce different nutrient combinations suited to varying soil and crop requirements.
Its potential benefits include:
- wider availability of complex fertilisers;
- greater choice for farmers;
- promotion of balanced fertilisation;
- flexibility for fertiliser manufacturers;
- improved responsiveness to international price changes.
However, the exclusion of urea has created a major price imbalance. Urea remains substantially cheaper than many phosphatic and potassic fertilisers, encouraging farmers to apply excessive nitrogen while reducing the use of phosphorus and potassium.
Other concerns include:
- continued imbalance in fertiliser consumption;
- dependence on imported phosphatic and potassic raw materials;
- fluctuations in international prices;
- large subsidy expenditure;
- limited awareness of crop-specific nutrient needs;
- weak soil-testing and extension services;
- occasional increase in farmers’ retail costs.
Way Forward
The subsidy system should promote balanced plant nutrition rather than merely increase fertiliser consumption.
Important measures include:
- gradually bringing all major fertilisers under a coherent nutrient-based framework;
- providing direct support to farmers where administratively feasible;
- expanding soil-health testing;
- promoting customised and crop-specific fertilisers;
- encouraging biofertilisers, compost and organic manure;
- improving domestic production and access to raw materials;
- monitoring retail prices and fertiliser availability;
- promoting precision application and efficient irrigation.
Subsidy policy should also consider secondary and micronutrients because deficiencies of zinc, boron and other nutrients can reduce crop productivity even when nitrogen, phosphorus and potassium are available.
Conclusion
The Nutrient-Based Subsidy Scheme represents a shift from product-based support towards subsidy based on plant nutrients. Its effectiveness, however, remains limited by the separate and highly subsidised treatment of urea. A more balanced fertiliser policy must combine affordable inputs with soil health, nutrient-use efficiency and environmental sustainability.
