NEW DELHI: The union cabinet approved a proposal to implement the nutrient-based subsidy (NBS) policy on decontrolled phosphatic & potassic fertiliser effective April 1, 2010, and also approved hike in urea price in a bid to promote nutrient-based fertilisers...

An official release issued by the ministry of chemicals and fertilisers said: "It has been decided to fix the subsidy on the nutrients N (Nitrogen), P (Phosphorus), K (Potash) and S (Sulphur) contents for the year 2010-11.  In addition to the fixed subsidy on the above mentioned nutrients, there will be an additional per tonne subsidy for subsidised fertiliser carrying other secondary nutrients and micro nutrients in formulations approved under FCO 1985." 

New Policy
To focus on nutrient-based fertilisers
Current policy skewed in favour of urea-based fertiliser
Govt plans to promote more NPK-based fertiliser
Move to reduce not only subsidy burden, also up efficiency
No capacity addition in the last decade
Import proportion on the rise
45% of total fertiliser consumption via imports
Subsidy touched Rs 1 lakh crore
Fertiliser imports to fall
Demand to change pricing mechanism

The release added that the intent of the government to move towards NBS in the fertiliser sector was announced in the Budget speech of 2009-2010... "the NBS regime is expected to promote balanced fertilisation, and, consequently, increase agriculture productivity through higher usage of secondary and micro nutrients.  It is also expected that new innovative fertiliser products would be developed subsequently under the NBS regime to meet the different requirements of agriculture.  The NBS regime is expected to depict the actual demand of fertilisers and promote realistic pricing of products in the international market.  Unshackling of fertiliser industry is also expected to attract fresh investments in the sector." 

It has also been decided to constitute an inter-ministerial committee under the chairmanship of secretary (fertilisers) to examine various scenarios, and make recommendations for finalisation of per nutrient subsidy to the government under the proposed policy. 

Under the NBS regime, since the subsidy on the subsidised nutrients and consequently subsidised fertilizers will remain fixed, the retail prices of subsidised fertilisers at farm gate will be decided by the companies.  The fertiliser industry has assured that under the NBS regime, the price line around the current level would be maintained during Kharif 2010. "The government, in consultation with the fertiliser industry, will make interventions in such a manner that the farm gate prices of non-urea fertilisers are, as far as possible,  near the current prices so that the farmers are not adversely affected."

The provision of additional subsidy for fortified and supplemented fertiliser will encourage production and application of fertilisers carrying secondary and micro nutrients. 

Urea, which has the maximum tonnage consumed among nitrogenous fertilisers in the country, will continue to be under the current MRP regime.  However, it has been decided to increase the maximum retail price of urea from Rs 4,830/- per metric tonne to Rs 5,310 per metric tonne effective April 1, 2010.

"The NBS regime will be implemented with effect from April 1, 2010.  The subsidy will continue to be disbursed through the industry during the first phase.  The industry will receive subsidy based on certification of sale by the state governments/ statutory auditors of the company as in the past. The implementation and distribution of the fertiliser will continue to be monitored through the online, web-based fertiliser monitoring system (FMS)."