Fertilizer Policy in India

By : Neha Dhyani

Updated : Jun 14, 2022, 6:30

To promote sustainable agricultural growth and balanced use of fertilizers and nutrients, it is essential to make them available to farmers at competitive prices. With this goal, urea will be sold as the only controlled fertilizer at the statutory uniform retail price, and uncontrolled phosphate and potassium fertilizers will be sold at the indicated maximum retail price (MRP).

Agricultural policy reform and the Fertilizer Policy in India are one of the major challenges that India is facing today. Such reforms are needed to accelerate agricultural growth, reduce poverty, ensure food security and promote more sustainable use of natural resources.

The Government of India has made fertilizers an indispensable product and has issued a Fertilizer Control Order (FCO) as stated by the Essential Commodities Act, 1957. No fertilizer grants were paid until 1977, except for Potash, which was subsidized for only one the year 1977.

What are Fertilizers?

Fertilizers are defined as natural or artificial organic or inorganic substances that provide one or more of the chemical elements/nutrients needed for plant growth.

They provide plants with 6 major nutrients and 8 micronutrients for balanced growth.

The Fertilizer Policy in India

Indian soils are deficient in nitrogen, phosphorus, and potassium and do not produce high yields. Therefore, the need for fertilizers is essential for the Green Revolution which had a major impact on India's agriculture.

In this way, India was able to achieve self-sufficiency in food production. This led to major accomplishments and modifications in the Fertilizer Policy in India.

Details about the Fertilizer Policy in India

The Fertilizer Manufacturing Company (PSU) is stated as National Fertilizers Limited, Rashtriya Chemicals & Fertilizers Limited, etc. The Fertilizer production cooperatives are IFFCO, KRIBB, etc. India ranks 3rd in production and 2nd in consumption of fertilizers across the globe.

The decision-making body of the Fertilizer Policy in India comprises the Fertilizer Bureau, Ministry of Chemicals and Fertilizers, Government of India Fertilizer policy and constitutional provisions Union list (entry 52) & concurrent list (entry 33).

The Act that Governs the Fertilizer Policy of India

The fertilizer industry is headed and controlled by the Federal Government of 1951 (the first schedule of the IDR - Industrial Development and Regulation Act as per Schedule I entry 52 and Schedule III entry 33. Urea dominates the sector as it is the most produced (86%), most consumed (74%), and most imported (52%).

India produces about 80% of the required amount of urea fertilizer, and the fertilizer industry can meet 50% of the demand for domestic phosphate fertilizers. However, India still relies heavily on imports of raw materials for phosphate fertilizers and potassium fertilizers.

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Fertilizer Policy in India and Government Intervention

The focus of the Fertilizer Policy in India was on primary (macro) nutrients. Since its independence, the Government of India has regulated the sale, price, and quality of fertilizers. The policy has declared fertilizer an essential commodity.

India is currently importing about 80,000 tonnes of urea out of a total demand of 310,000 tonnes which has caused a huge budget deficit. Also, only 35% of all fertilizer subsidies reach smallholders. The rest go to black markets, large farmers, and inefficient producers. India is the world's third-largest fertilizer consumer and is heavily dependent on urea imports.

Fertilizer is the second-highest subsidy after food (Rs. 073,000 or 0.5% of GDP). This makes it imperative to have a robust Fertilizer Policy in India to monitor and control the production, import, utilization, and export of fertilizers.

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FAQs on Fertilizer Policy in India

Q.1. What is the RPS under the Fertilizer Policy in India?

Under the Fertilizer Policy in India, RPS stands for Retention Pricing Scheme. India introduced nitrogen fertilizer in 1977. It was then expanded to phosphate fertilizers and potash fertilizers (including imported fertilizers). This scheme is to work on the difference between the holding price (government-rated manufacturing cost plus 12% net income after tax) and the statutory sale. The selling prices of the fertilizers are fixed by the government and the retention prices are for the producers. The difference between the retention price and the selling prices is paid to the producers by the government.

Q.2. With regards to the Fertilizer Policy in India, what is the Nutrient-based Grants (NBS) Policy for Q1 2010?

The government sets annual subsidies based on the weight of various major/micronutrients (N, P, K, S, etc.) contained in the fertilizer. Manufacturers/marketers can set the maximum retail price (MRP) to a reasonable level. It aims to ensure balanced use of fertilizers, improve agricultural productivity, promote the growth of the domestic fertilizer industry and reduce the burden of subsidies. All these come under the Fertilizer Policy in India.

Q.3. What is the Neem Coated Urea Policy, 2015 as associated with the Fertilizer Policy in India?

With regards to the Fertilizer Policy in India, the government requires domestic fertilizer companies to coat at least 75 per cent of urea production with neem (which can be as high as 100 per cent). Previously there was an upper limit of 35%. The government also allows manufacturers to charge an additional fee of only 5 per cent for neem-coated urea. The aim is to control urea abuse, which deteriorates soil health and affects overall crop yields. It maximizes domestic urea production and promotes the energy efficiency of urea units.

Q.4. What is the Gas pooling Directive, 2015, as stated under the Fertilizer Policy in India?

All urea units get gasoline at a single price. The aim is to change the dynamics of the area sector industry by levelling gas costs for all players. This has all been stated under the Fertilizer Policy in India.